Annual-Report-En-2017.Pdf

COVER NEW_M5 copy.pdf 1 13/3/61 21:32

Untitled-2 1 17/3/61 6:20 PM Our Vision: THE MOST ADMIRED BANK

001-079 (4C) NEW_M5.indd 1 12/3/61 16:22 001-079 (4C) NEW_M5.indd 2 12/3/61 16:23 001-079 (4C) NEW_M5.indd 3 12/3/61 16:23 001-079 (4C) NEW_M5.indd 4 12/3/61 16:23 * Photo Shot at Food Court, SCB Head Office

001-079 (4C) NEW_M5.indd 5 12/3/61 16:23 001-079 (4C) NEW_M5.indd 6 12/3/61 16:23 * Photo Shot at SCB Business Center, 5th Floor CentralWorld

001-079 (4C) NEW_M5.indd 7 12/3/61 16:23 001-079 (4C) NEW_M5.indd 8 12/3/61 16:23 * Photo Shot at SCB Investment Center, 5th Floor CentralWorld

001-079 (4C) NEW_M5.indd 9 12/3/61 16:23 001-079 (4C) NEW_M5.indd 10 12/3/61 16:23 * Photo Shot at Too Fast To Sleep. SCB 2nd Floor, SCB Siam Square Branch

001-079 (4C) NEW_M5.indd 11 12/3/61 16:23 001-079 (4C) NEW_M5.indd 12 12/3/61 16:23 * Photo Shot at SCB Academy, SCB Head Office

001-079 (4C) NEW_M5.indd 13 12/3/61 16:24 ANNUAL REPORT 2017

CONTENTS

01 02 05 06

MESSAGE FROM BOARD OF DIRECTORS CORPORATE SOCIAL CORPORATE THE BOARD OF 18 AND SENIOR EXECUTIVE RESPONSIBILITY GOVERNANCE DIRECTORS OFFICERS

SCB Sustainability Report 82 Corporate Governance Report 2017 94 Board of Directors 22 Corporate Social Responsibility 83 Internal Control and Risk Management 128 Senior Executive Officers Committee Report 30 Related Party Transactions 132 14 Organization Structure 40 The Nomination, Compensation and 134 Corporate Governance Committee Report

The Executive Committee Report 136 03 04 07 08

BUSINESS OVERVIEW RISK MANAGEMENT FINANCIAL SUPPLEMENTARY AND RISK FACTORS 66 REPORTS INFORMATION 305

Thai Economy in 2017 and Outlook for 2018 44 Board of Directors Responsibility 140 Industry and Competition Review 46 for the Financial Statements

Strategy and Business Overview 49 Audit Committee Report 141 of the Bank and its Subsidiaries Management Discussion and Analysis 145 Awards and Achievement in 2017 64 Comparative Key Financial Statistics 161 Independent Auditor’s Report 163

Financial Statements and Notes 169 to the Financial Statements

001-079 (4C) NEW_M5.indd 14 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

CONTENTS

01 02 05 06

MESSAGE FROM BOARD OF DIRECTORS CORPORATE SOCIAL CORPORATE THE BOARD OF 18 AND SENIOR EXECUTIVE RESPONSIBILITY GOVERNANCE DIRECTORS OFFICERS

SCB Sustainability Report 82 Corporate Governance Report 2017 94 Board of Directors 22 Corporate Social Responsibility 83 Internal Control and Risk Management 128 Senior Executive Officers Committee Report 30 Related Party Transactions 132 15 Organization Structure 40 The Nomination, Compensation and 134 Corporate Governance Committee Report

The Executive Committee Report 136 03 04 07 08

BUSINESS OVERVIEW RISK MANAGEMENT FINANCIAL SUPPLEMENTARY AND RISK FACTORS 66 REPORTS INFORMATION 305

Thai Economy in 2017 and Outlook for 2018 44 Board of Directors Responsibility 140 Industry and Competition Review 46 for the Financial Statements

Financial Statements and Notes 169 to the Financial Statements

001-079 (4C) NEW_M5.indd 15 12/3/61 16:24 ANNUAL REPORT 2017

2017 FINANCIAL HIGHLIGHTS

LOANS DEPOSITS PROFITABILITY ASSET QUALITY (Consolidated, Baht billion) (Consolidated, Baht billion) (Consolidated, Baht billion) (Consolidated, Baht billion, %) The 4.9% yoy overall loan growth was contributed The 3.3% yoy deposit growth mainly came from Net profit declined yoy due to higher provisions and NPL coverage ratio rose to 137.3%, while the NPL ratio by corporate and retail segments. higher savings and current deposits, following higher operating expenses. However, net fee income increased slightly yoy. the(Consolidated, Bank’s strategy Baht billion) to increase the proportion and net interest income rose yoy. of low cost deposits. Coverage ratio 150.8% 138.1% 134.3% 137.3% 109.8%

16 +4.9% +3.3% -9.4% yoy yoy yoy Gross NPL 53.3 ratio 2,092 50.2 2,035 2,026 2.83% 47.2 47.6 2.89% 2.67% 1,939 1,895 1,891 2.14% 2.11% 1,833 1,823 43.2 1,735 1,777

Non-performing loans +13.8% yoy 65.6 59.0 57.6

40.0 42.7

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

001-079 (4C) NEW_M5.indd 16 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

17 +4.9% +3.3% -9.4% yoy yoy yoy Gross NPL 53.3 ratio 2,092 50.2 2,035 2,026 2.83% 47.2 47.6 2.89% 2.67% 1,939 1,895 1,891 2.14% 2.11% 1,833 1,823 43.2 1,735 1,777

Non-performing loans +13.8% yoy 65.6 59.0 57.6

40.0 42.7

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

001-079 (4C) NEW_M5.indd 17 12/3/61 16:24 ANNUAL REPORT 2017

01 MESSAGE FROM THE BOARD OF DIRECTORS

01 02 03 04 05 06 07 08 08

Dr. Vichit Suraphongchai Mr. Anand Panyarachun Mr. Arthid Nanthawithaya Chairman of the Executive Chairman of the Board President and Committee Chief Executive Officer

001-079 (4C) NEW_M5.indd 18 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Dear Fellow Shareholders,

In 2017, the Thai economy registered a higher-than- The Bank invested in: (1) technology platform capabilities expected GDP growth of 3.9 percent and has shown clear to accommodate all types of business requirements for signs of recovery. Major economies around the world new customer experiences, (2) big data analytics to develop also experienced a rebound in unison with the overall labor and deliver products and services that truly meet customer market fully recovering to the level above the pre-crisis needs, and (3) people management to equip SCB people peak of 2008. International trade has accelerated on the with skills and insights to operate in the new financial and back of the global economic expansion which has directly banking landscape. benefited Asian exporters including Thailand. Thai export sector grew at a fast clip of 9.9 percent across the board and was the key reason behind higher GDP growth in 2017. 2017 Financial Results In addition, recovery in the export sector also helped revive private investment after a 3-year period of contraction. Net profit in consolidated amounted to Baht 43,152 million in However, the effect of export growth has not yet fully 2017, a decrease of 9.4% yoy from Baht 47,612 million in the passed through to the labor market and thus household previous year. Lower net profit was primarily due to higher consumption failed to keep pace with the export expansion. prudential provisions set aside to align expected loss principles with new accounting standards to take effect in 2019 as well 2017 has been another challenging year for the financial as an 11.6% rise in operating expenses. Higher expenses 19 services sector, with constant external factors. Today’s were mainly a consequence of the Bank’s investment in competition is no longer limited to banks as global digital banking technology to expand the customer base technology companies, including Telecom and FinTech, through digital platforms, such as mobile banking platform, have begun to offer financial services in their product and new payment technologies, such as QR code payment, platforms, blurring the line of the banking industry. The as part of its digitization strategy. shift towards mobile banking and electronic banking among customers has reduced the need for traditional Total income increased by 2.2% from 2016. Net interest banking channels but come with heightened cyber income grew by 4.4% yoy to Baht 92,310 million, security risk which requires higher vigilance in financial driven by higher loan interest income from a 4.9% yoy transactions. Moreover, advancement of new technologies, loan growth despite an interest rate cut of 0.25% in 2017. such as Blockchain, necessitates the players to on constant Non-interest income totaled Baht 43,903 million, a alert to learn and integrate new technologies into their decrease of 2.2% yoy because of lower net insurance product and service development. Apart from regulatory income and investment income. Net fee income rose changes, Thailand’s transition towards a cashless society 6.7% yoy from stronger mutual fund business, higher which is supported by the government’s national e-payment bancassurance fee, and higher net trading and FX income. program has put direct pressure on fee income of banks with a trend of narrower margins. Given these factors, As of December 31, 2017, the Bank’s gross NPL ratio commercial banks must change the way they do business to was at 2.83%, an increase from 2.67% at the end maintain their relevance, keep their customers, and survive of 2016, driven by higher NPLs in the SME portfolio and in the future. mortgage loans for small business while NPLs in the corporate sector declined. The Bank set aside loan loss The Bank continued to push ahead with the SCB provisions of Baht 25,067 million or 1.26% of the total Transformation program in 2017, commenced in mid-2016 loans in 2017, causing the coverage ratio to rise to 137.3% driven by a vision to becoming “the Most Admired Bank”, at the end of 2017 from 134.3% at the same period in 2016. with an emphasis on foundation transformation to achieve the key strategic objective of being technology-driven.

001-079 (4C) NEW_M5.indd 19 12/3/61 16:24 ANNUAL REPORT 2017

The Bank maintained a solid capital base with its total The Bank has joined the “Thailand’s Private Sector Collective consolidated capital under Base III as high as 17.7% of total Action Coalition Against Corruption (CAC) and was risk-weighted assets and 15.6% common equity Tier 1 capital re-certified on November 10, 2017. These endeavors at the end of 2017. underline the Bank’s steadfast determination to uphold the corporate governance principles in all areas of its operations.

Developments in Corporate Governance Practices 2018 Outlook Corporate governance is an ongoing commitment at SCB. The Bank strongly believes that effective, transparent, and The Bank forecasts that the Thai economy will maintain its accountable management is the key to building trust and growth momentum of 4.0% in 2018, fueled by continued confidence among shareholders, investors, stakeholders and growth in the export sector from global economic all related parties. The Bank was rated “Excellent” which is expansion, strength in the tourism industry, and higher the highest level in the 2017 CG assessment of Thai Listed government spending. Particularly, public investment in Companies by the Thai Institute of Directors Association major infrastructure projects is expected to double along (IOD), a recognition that the Bank has earned every year since with spending on the Eastern Economic Corridor (EEC) 20 2005. In addition, the Bank received a full score of 100 points development project and the economic stimulus measures on the Annual General Meeting Checklist by the Thai for low-income earners. Furthermore, private investment is Investors Association in which the Bank has been in the expected to pick up as exports recover. However, 99-100 tier for nine consecutive years. household spending will be under pressure from low agricultural prices and household debts which still remain To further improve its corporate governance practices, high despite a declining trend. Major risks to the Thai the Bank has adopted the corporate governance code for economy will be uncertainties in global politics and economic listed companies 2017 (CG Code) issued by the Securities policies, Thai baht appreciation, and tightening global and Exchange Commission. In the changing business context, liquidity conditions following the Federal Reserve’s the CG Code will serve as guiding principles for the Board contractionary monetary policy which may send shockwaves to steer the Bank towards sustainable growth. Fighting to counterparty countries with high foreign debts and raise corruptions of all forms is also high on the Bank’s agenda. the risk of asset-price corrections including Thai equities

001-079 (4C) NEW_M5.indd 20 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

which had rallied last year. Nonetheless, risk to the overall The Bank will continue to invest in technology infrastructure economic stability will be mild given the high level of foreign and leverage advanced technologies, including blockchain, exchange reserves and strong financial positions of major artificial intelligence (AI), machine learning, and cloud companies. computing, to design products and services that create value to customers. The Bank also places importance on cyber security so that customers can use the Bank’s digital 2018 Strategy platforms with complete confidence. The Bank will also continue to invest in people and build a good corporate 2018 will mark a major shift in the Thai banking industry culture based on its belief that relationships between staff influenced by changing consumer behavior, new financial and customers must still be nurtured even with increased technologies, and changing government and regulatory digitization in customer service. Therefore, the Bank will policies. Agility will therefore be the Bank’s business focus on “shifting the paradigm” of SCB people at all levels imperative to prepare for impending uncertainties and and fostering the culture of agility and customer centricity. intensified competition. Going forward in 2018, the Bank will continue to pursue the key strategy underpinning The Siam Commercial Bank is committed to becoming the SCB Transformation initiative which is to become a “the Most Admired Bank” by balancing our value propositions technology-driven organization that leverages its technology to all stakeholders from customers, employees, shareholders, 21 capabilities to reduce costs, grow revenue, and deliver regulators, to the society. We envision SCB to be the bank great customer experiences. SCB’s “Going Upside Down” of choice for our customers, a caring employer for our strategy rests on 5 strategic pillars: (1) Lean the Bank, staff, an attractive investment for our shareholders and reducing the cost to service and increasing agility through investors, a prudent bank for our regulators, and a digital technologies, (2) Digital Acquisition to deepen responsible corporate citizen for our society and environment. relationships with existing customer and attract new We believe that this is the right path for SCB with 111 years customers, especially digital users, (3) High-Margin of success to grow sustainably together with the Thai society. Lending, (4) Data Capabilities, developing and embracing data analytics across the organization, and (5) New Business Model, operating as a platform to deliver new experiences and create value for every segment.

(Mr. Anand Panyarachun) (Dr. Vichit Suraphongchai) (Mr. Arthid Nanthawithaya) Chairman of the Board Chairman of the Executive President and Committee Chief Executive Officer

001-079 (4C) NEW_M5.indd 21 12/3/61 16:24 ANNUAL REPORT 2017

02 BOARD OF DIRECTORS

01 02 03 04 05 06 07 08 08

MR. ANAND DR. VICHIT PANYARACHUN SURAPHONGCHAI

Chairman of the Board Director and Chairman of the and Independent Director Executive Committee

Mr. Panyarachun completed his Bachelor of Dr. Suraphongchai holds a Bachelor’s Arts (Honors) in law at Trinity College, Degree in engineering from Chulalongkorn University of Cambridge, U.K. and University, a Master’s Degree in engineering commenced his distinguished career from the University of California, at the Ministry of Foreign Affairs Berkeley, U.S., and a Master’s Degree after graduation. Among the and a Ph.D. in business administration 22 highlights of his career, he served from the University of California, as Ambassador to the United States, Permanent Representative Los Angeles, U.S. to the United Nations, and Permanent Secretary of the Dr. Suraphongchai commenced Ministry of Foreign Affairs. his long and illustrious career in banking in 1977 at Bangkok Bank Mr. Panyarachun is widely recognized PCL. He later served the Royal Thai for his pivotal role in the Kingdom’s Government as the Minister of political development when he was Transport and Communications called upon twice to serve as the from 1994-1995. He returned to the Prime Minister of Thailand, and chaired banking business in 1998 as the the committee to draft the nation’s new constitution in 1997. Mr. Panyarachun Chairman of Radanasin Bank PCL has received honorary degrees from and thereafter, in 1999, he joined various Thai and foreign universities for SCB as Chairman of the Executive his distinguished roles in many areas. He is Committee and Director of the Bank. also a 1997 recipient of the prestigious Ramon Magsaysay Award. He was appointed Throughout his tenure as Director in 2003 by the Secretary-General of the and Chairman of the Executive United Nations to chair its High-Level Committee, Dr. Suraphongchai has Panel on Threats, Challenges and Change, demonstrated exemplary visionary established to review the U.N.’s role in leadership, guiding SCB Group a rapidly changing global political environment. towards the successful transformation Mr. Panyarachun has been the Board of its business model that greatly Chairman of the Siam Commercial Bank contributes to the buoyant growth since 2007. He also holds key positions in of the Bank with an emphasis on several organizations such as UNICEF the adaptation to the era of technology. Ambassador in Thailand, Honorary Chairman of Operation Smile Thailand, Chairman of the Advisory Council of Vidyasirimedhi Institute of Science and Technology, Member of the Advisory Council of Transparency International, and Advisor to the Board of the Anti-Corruption Organization of Thailand Foundation.

001-079 (4C) NEW_M5.indd 22 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

DR. CHIRAYU KHUNYING JADA ISARANGKUN NA AYUTHAYA WATTANASIRITHAM

Director and Chairman of the Nomination, Independent Director, Chairperson of the Corporate Compensation and Corporate Governance Committee Social Responsibility Committee, and Member of the Nomination, Compensation and Corporate Governance Committee

Dr. Isarangkun Na Ayuthaya holds a Bachelor’s Khunying Wattanasiritham holds Bachelor’s Degree in economics (Honors) from the and Master’s Degrees in natural science London School of Economics, U.K., and a and economics from the University of Ph.D. in economics from the Australian Cambridge, U.K., and a Master’s Degree National University, Australia. Starting in economic development from Williams his career as an economist at the College, U.S. Khunying Wattanasiritham 23 Department of Technical and commenced her career in banking Economic Cooperation, he went at the Bank of Thailand before on to serve as Dean of the School joining Siam Commercial Bank of Development Economics at the PCL in 1975. She served as National Institute of Development the Bank’s President and CEO Administration (NIDA). During from 1999 to 2007. 1981-1986, he was appointed to the Cabinet of the Royal Thai In addition to her position as Government, serving successively Director of the Bank, Khunying as Deputy Minister of Industry, Wattanasiritham also serves as Minister of Industry, and Minister Chairperson of SCB Life Assurance Attached to the Prime Minister’s Office. Since 1987, Dr. Isarangkun PCL, Chubb Samaggi Insurance PCL, Na Ayuthaya has been Director- and Siam Paragon Development General of the Crown Property Co., Ltd., and as Independent Bureau. In 2016, he was appointed Director of Minor International by a royal command to also assume PCL. She also holds positions in the prestigious position of Lord several academic and non-profit Chamberlain of the Bureau of the organizations. Royal Household.

Apart from his position as Director of the Bank, Dr. Isarangkun Na Ayuthaya also serves at several other organizations, including Director of the Chaipattana Foundation, the Phra Dabos Foundation, and the Siriraj Foundation; and as Secretary-General of the Sai Jai Thai Foundation under the Patronage of His Majesty the King as well as the Royal Project Foundation. He has also been appointed Chairman of the Board of Directors of Siam Cement PCL and Deves Insurance PCL.

001-079 (4C) NEW_M5.indd 23 12/3/61 16:24 ANNUAL REPORT 2017

MR. PRASAN DR. KULPATRA CHUAPHANICH SIRODOM

Independent Director and Independent Director, Member of the Audit Committee, Chairman of the Audit Committee and Member of the Corporate Social Responsibility Committee

Mr. Chuaphanich obtained a Bachelor Dr. Sirodom earned a B.B.A. (First-Class of Accounting (Second-Class Honors) Honors) in finance from Thammasat and a Diploma in Auditing from the University as a recipient of the King’s Faculty of Commerce and Accountancy, Scholarship, an M.B.A. in finance from Chulalongkorn University. In addition, West Virginia University, U.S., and a

24 he received training at several Ph.D. in finance from the University distinguished institutions, such as the of Pittsburgh, U.S. Executive Management Program at the Ivey School of Business, Dr. Sirodom held the position of University of Western Ontario, Dean of the Faculty of Commerce Canada, and the Leading Professional and Accountancy, Thammasat Services Firms Course at Harvard University, during 2010-2013. Business School, U.S. Mr. Chuaphanich In addition to her position as Director has more than 35 years of experience of the Siam Commercial Bank, in the accounting profession, including she holds key positions in several being a former Executive Chairman organizations, including Independent at PricewaterhouseCoopers Thailand. Director and Chairperson of the Audit Committee of Thai President Foods PCL, Mr. Chuaphanich has been the Independent Director and the Member Chairman of the Bank’s Audit of the Audit Committee of President Committee since 2015. Currently, Bakery PCL and the Erawan Group PCL, he also holds key positions in various Independent Director and Chairperson organizations, such as Expert Member of the Audit Committee and the on Accounting of the Office of Insurance Corporate Governance Committee Commission (OIC), Chairman of Board of Thai Wacoal PCL, and Independent of the Thai Institute of Directors Director of Thailand Securities Association (IOD), Member of Thailand’s Depository Co., Ltd. and Thailand Private Sector Collective Action against Clearing House Co., Ltd. In addition, Corruption Committee (CAC), Expert she has been appointed Expert Member on Accounting of the Public Member of the Private Investments in Sector Audit and Evaluation Committee, State Undertakings Policy Committee, and Independent Director and Member Expert Member on Finance of the Public of the Audit Committee of PTT Global Sector Audit and Evaluation Committee, Chemical PCL and Advanced Info and Director of Thai Listed Companies Services PCL. Association. Dr. Sirodom also serves at a number of academic and non-profit organizations.

001-079 (4C) NEW_M5.indd 24 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

MR. EKAMOL MRS. KANNIKAR KIRIWAT CHALITAPORN

Independent Director and Director, Member of the Executive Committee, Member of the Audit Committee and Member of the Corporate Social Responsibility Committee

Mr. Kiriwat holds a Bachelor’s Degree Mrs. Chalitaporn holds a Bachelor’s (Magna Cum Laude) in economics from Degree in business administration from Dartmouth College, U.S., and an M.B.A. the University of Colorado, U.S., and Degree (finance) from Harvard attended the Advanced Management Business School, U.S. Program at Harvard Business School, U.S. Prior to joining the 25 Mr. Kiriwat is an expert in money Bank, she worked at Unilever and capital markets. He was an Thailand for 32 years. During her executive at the Bank of Thailand, years at Unilever, she played a critical serving in various capacities, role in dramatically increasing its market including Director supervising share and profitability in Thailand by the Financial Institution applying modern marketing concepts. Application and Examination Department and the International Mrs. Chalitaporn was appointed Strategy Office, and Assistant Director of the Bank in 2002 and Governor and Deputy Governor. President in 2007-2015. She brings Mr. Kiriwat was Secretary-General a fresh, invigorating, and consumer- of the Securities and Exchange focused perspective to the Bank’s Commission from 1992 to 1995. retail business, and is widely recognized He was a Member of Parliament as the architect behind the hugely during 2001-2004. In addition to successful transformation of the Bank. his position as Director of the Siam Commercial Bank, he presently is In addition to her position as Director Independent Director of Property of the Siam Commercial Bank, Perfect PCL. Mrs. Chalitaporn currently serves as Vice Chairperson and Chief Advisor to the Executive Committee of Osotspa Co., Ltd. and Advisor of Index Living Mall Co., Ltd.

001-079 (4C) NEW_M5.indd 25 12/3/61 16:24 ANNUAL REPORT 2017

MR. KRIRK DR. THAWEESAK VANIKKUL KOANANTAKOOL

Independent Director and Independent Director and Member of the Executive Committee Member of the Executive Committee

Mr. Vanikkul received an L.L.B. with Dr. Koanantakool attained a Bachelor’s second-class honors from Chulalongkorn Degree and a Ph.D. in electrical University, a B.A. in Jurisprudence engineering from Imperial College, (Honors) from Oxford University, U.K, University of London, U.K. and a barrister-at-law from Middle He has held several key positions Temple, London, and from the 26 in the public sector, including Institute of Legal Education, Member of National Reform Steering Thai Bar Association. Assembly, Associate Director of Thammasat University’s Information Mr. Vanikkul has a strong legal Processing Institute for Education and background and has held Development, Executive Director various key positions in national of the National Electronics and organizations, including Deputy Computer Technology Center Governor for Financial Institutions (NECTEC), and President of the Stability, the Bank of Thailand, and National Science and Technology Development Agency (NSTDA). Member of the Council of State, the Office of the Council of State. During his years in these key positions, Dr. Koanantakool was In addition to his position as Director widely recognized as a key figure in, of the Siam Commercial Bank, for example, stewarding the Y2K Mr. Vanikkul also serves as Expert problem resolution, drafting and Director for the Office of Knowledge advocating the national IT policy, Management and Development formulating Thailand’s first national (public organization), Independent ICT master plan (2002-2006), Director and Member of the Audit pushing IT laws, and assisting the Office of the Civil Service Commission Committee of L. P. N. Development in establishment of the Ministry of PCL, and Independent Director of Information and Communication Osotspa Co., Ltd. Technology.

Presently, Dr. Koanantakool also holds key positions in several organization such as Chairman of the Executive Board of Electronic Government Agency, Expert Member on Information Technology of the Public Sector Audit and Evaluation Committee, Member of the National Economic Reform Committee, and Member of the National Economic and Social Development Board.

001-079 (4C) NEW_M5.indd 26 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

MR. WEERAWONG DR. EKNITI CHITTMITTRAPAP NITITHANPRAPAS

Independent Director and Member of the Nomination, Director and Member of the Nomination, Compensation and Corporate Governance Committee Compensation and Corporate Governance Committee

Mr. Chittmittrapap earned a Bachelor Dr. Nitithanprapas earned a Bachelor’s of Laws from Chulalongkorn University Degree in economics (Honors) from and a Master of Laws from the University Thammasat University under a of Pennsylvania, U.S. He is a Thai scholarship from the Thammasat barrister-at-law and the first Thai Economics Association. He went

lawyer to be admitted to the on to receive a Master’s Degree in 27 New York State Bar Association, U.S. economics from the University of Illinois at Urbana-Champaign, Mr. Chittmittrapap is widely U.S., and a Ph.D. in economics recognized in Thailand for his from Claremont Graduate legal expertise and has extensive University, U.S., both under experience in corporate governance Royal Thai Government matters. He was Chairman of scholarships. Weerawong, Chinnavat & Peangpanor Ltd., Independent Formerly, he was Deputy Director of Nok Airlines PCL and Director-General of the Fiscal Minor International PCL, Independent Policy Office, Spokesman of the Director and Member of the Audit Ministry of Finance, Chairman of Committee of GMM Grammy PCL the Executive Committee of and Thai Airways International PCL. Export-Import Bank of Thailand, Minister (Office of Economic & Mr. Chittmittrapap presently serves Financial Affairs) of the Royal Thai as Independent Director and Chairman Embassy in the United Kingdom of the Nomination, Compensation and and Europe, and senior advisor Corporate Governance Committee of at the World Bank in Washington, D.C. SCB Life Assurance PCL, Independent Director of Berli Jucker PCL, and In addition to his position as Director Independent Director and Member of the Siam Commercial Bank, of the Audit Committee of Bangkok Dr. Nitithanprapas serves as Dusit Medical Services PCL. Director-General of the State Enterprise Policy Office, Ministry of Finance; Chairman of National Credit Bureau Co., Ltd.; and Director and Member of the Risk Management Committee of IRPC PCL.

001-079 (4C) NEW_M5.indd 27 12/3/61 16:24 ANNUAL REPORT 2017

MR. KAN MR. CHAKKRIT TRAKULHOON PARAPUNTAKUL

Independent Director and Member of the Director and Member of the Corporate Social Nomination, Compensation and Responsibility Committee Corporate Governance Committee

Mr. Trakulhoon received a Bachelor’s Degree Mr. Parapuntakul received a Bachelor in engineering (electrical) with first-class of Accounting from Thammasat University honors from Chulalongkorn University, and an M.B.A. from Angelo State University, and Master’s Degrees in engineering and Texas, U.S. management from the Georgia Institute of Technology, U.S. He also completed Mr. Parapuntakul has broad work 28 the Advanced Management Program experience in the public sector (AMP) at Harvard University, U.S. and state-owned enterprises in a number of key positions Mr. Trakulhoon possesses a wealth including Director-General of the of professional experience as a top Public Debt Management Office; executive of leading organizations, Director-General of the Treasury including as President and Chief Department; and Director, Chairman Executive Officer of Siam Cement PCL of the Audit Committee and Member and Director of Kubota Corporation of the Internal Control and Risk (Japan). He also currently serves on Management Committee of Credit key national panels of Thailand, including Guarantee and Investment Facility on the National Strategy Committee (CGIF)established by the Asian as Expert Member, the National Development Bank (ADB). He also Administration Reform Committee, served on the boards of several private the National Competitiveness Development companies, including Chairman of ASEAN Committee, the National Council on Potash Mining PCL and Director of PTT Research and Innovation Policy, the Eastern Exploration and Production PCL. Economic Corridor Policy Committee, the National Intellectual Property Policy In addition to his position as Director Committee, and the National Strategic of the Siam Commercial Bank, Administration Committee as Advisor. Mr. Parapuntakul currently serves as Deputy Permanent Secretary of the In addition to his position as Director of Ministry of Finance, President of the Siam Commercial Bank, Mr. Trakulhoon Federation of Accounting Professions presently is Director of Siam Cement under the Royal Patronage of PCL, Chairman of Advanced Info His Majesty the King, Independent Service PCL, and Independent Director Director and Chairman of the Audit of Intouch Holding PCL and Bangkok Committee of MPG Corporation PCL, and Dusit Medical Services PCL. Independent Director of Esso (Thailand) PCL.

001-079 (4C) NEW_M5.indd 28 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

MR. ARTHID NANTHAWITHAYA

President and Chief Executive Officer, Member of the Executive Committee, and Member of the Corporate Social Responsibility Committee

Mr. Nanthawithaya holds a Bachelor’s Degree in economics from Chulalongkorn University and an M.B.A. in finance from the Sasin Graduate Institute of Business Administration. He also participated in an exchange program at the Wharton School, University of Pennsylvania, U.S. 29

Mr. Nanthawithaya commenced his career at Siam Commercial Bank’s Treasury Department in 1994, before moving on to Cargill Financial Services as Hedge Fund Manager in 1998. After that, he joined Standard Chartered Bank, where he rose to the position of Managing Director and Regional Head of Capital Markets, Southeast Asia. Mr. Nanthawithaya re-joined the Siam Commercial Bank in 2008 as Senior Executive Vice President, Corporate Banking Group.

He was appointed Chief Executive Officer and Vice Chairman of the Executive Committee of the Bank in 2015 and the President and Chief Executive Officer in 2016.

001-079 (4C) NEW_M5.indd 29 12/3/61 16:24 ANNUAL REPORT 2017

02 SENIOR EXECUTIVE OFFICERS

01 02 03 04 05 06 07 08 08

MRS. KITTIYA TODHANAKASEM Senior Executive Vice President, Chief Financial Officer

Mrs. Todhanakasem holds a Bachelor’s Degree in Accounting with Honors from Thammasat University and an M.B.A. from the University of Illinois, Urbana-Champaign, U.S. She joined Siam Commercial Bank in April 2016 as Senior Executive Vice President and Chief Financial Officer.

She has over 30 years of experience in finance and banking. She commenced her career in international banking at Kasikornbank PCL in 1982 and moved on to be Head of Financial Institutions at Bank of America, Bangkok in 1991. In 1995, she joined Submicron Technology PCL as Chief Financial Officer. During the Asian financial crisis in 1997, she was appointed to be Executive Vice President at Krungthai Bank PCL to head corporate debt restructuring and was later appointed to be Senior Executive Vice President and entrusted to lead various functions there including corporate banking, risk DR. VICHIT SURAPHONGCHAI management, international banking, overseas branches Chairman of the Executive Committee and financial management. Her last position was as First (see page 22 for the profile) Senior Executive Vice President, Chief Financial Officer. She was Chairman of Krungthai Card PCL, Chairman of the MR. ARTHID NANTHAWITHAYA Board of Executive Directors at Krungthai Panich Insurance President and Chief Executive Officer PCL and Director at Krungthai-AXA Life Insurance PCL. (see page 29 for the profile) Currently, she is Chairman of SCB Abacus, Director at SCB Life Assurance PCL and Director at the Office of SMEs Promotion (OSMEP).

001-079 (4C) NEW_M5.indd 30 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

MR. ANUCHA LAOKWANSATIT, CFA MRS. WALLAYA KAEWRUNGRUANG Senior Executive Vice President, Senior Executive Vice President, Chief Risk Officer Chief Legal and Control Officer

Mr. Laokwansatit was appointed as Senior Executive Mrs. Kaewrungruang is a veteran in the field of financial law. Vice President and Chief Risk Officer of the Bank in June With over 33 years of experience in banking and financial law, 2015. He was also appointed as a Board Director of SCB Life she has a deep understanding of commercial bank operations Assurance PCL. in June 2015 and as Chairman of the Board to further develop and add value to SCB’s legal functions. of SCB Asset Management Ltd. in July 2015. In February 2016, he was appointed to the Board and to also serve as Before joining the Bank, Mrs. Kaewrungruang worked as a legal Chairman of the Investment Committee of Digital Venture executive for firms in the banking and financial industry, Co., Ltd. including Krungthai Legal Services Co., Ltd., Bank of Asia PCL, Sukhumvit Asset Management Co., Ltd., and most recently Prior to assuming his position with the Bank, he served as Senior Executive Vice President, Managing Director, as General Manager and Chief Investment Officer at AIA Compliance and Legal Management Group for Krung Thai Bank Thailand, from 1999 to 2015. From 1998 to 1999 he was Assistant Secretary General for the Financial Sector PCL. She holds LL.B. and LL.M. degrees in business law Restructuring Authority, and between 1991 and 1998 was from Chulalongkorn University, and an LL.M. in international Financial Advisor to the Executive Board at TPI Polene banking law from Boston University, U.S. She is also a PCL; Executive Vice President at Thai Nitrate Co., Ltd; Barrister-at-Law at the Institute of Legal Education, Thai and Executive Vice President at Thai Caprolactam PCL. From Bar Association. She joined the Bank as Senior Executive 1990 to 1991, he was Associate Director of Structured Vice President in June 2014. Finance at Chase Manhattan Asia Ltd, Hong Kong, and from 1983 to 1990 he was Vice President of Corporate Banking at Chase Manhattan Bank, Bangkok Branch. Mr. Laokwansatit earned an M.B.A. with a concentration in finance and international business from the University of Chicago, U.S., and a Bachelor of Science degree, majoring in finance, from San Francisco State University, U.S.

001-079 (4C) NEW_M5.indd 31 12/3/61 16:24 ANNUAL REPORT 2017

MR. COLIN RICHARD DINN DR. JENS LOTTNER Senior Executive Vice President, Chief Technology Officer Senior ExecutiveVice President, Chief Transformation Officer

Mr. Colin Dinn joined Siam Commercial Bank in April 2016 as Dr. Lottner was appointed as Senior Executive Vice Senior Executive Vice President and Chief Technology Officer (CTO). President and Chief Transformation Officer of the Bank in His specific responsibility is managing the Group’s June 2015. Dr. Lottner began his career with McKinsey & Technology Function, creating a new capacity within the Company in 1992 in Germany, where he was elected Partner Bank to implement advanced digital capabilities for customers in 2000. He moved to Malaysia in 2001 and subsequently to and staff while moving toward a data-centric organization. Singapore in 2005, where he was a Senior Partner leading This requires digital de-coupling to meet the requirements McKinsey’s financial services practice in ASEAN until 2012. He of the core product systems and agility with digital platforms simultaneously led its Asia Pacific Risk Management Practice while also building out a strong technology foundation. and was a member of the Asia Pacific Management Committee.

Before joining Siam Commercial Bank, Mr. Dinn was Group Three years prior to joining the Bank, Dr. Lottner was Senior Executive for an Australian regional bank playing a number of Partner and Managing Director of the Boston Consulting critical delivery and strategy roles including: overall delivery Group in Singapore, heading its financial services practice across responsibility for establishment of a new wholly owned ASEAN. Dr. Lottner holds a Doctorate in Economics from the subsidiary; development of a regional-based model addressing Dresden University of Technology, Germany, and attained a products, processes and technology. Diploma in Economics from the University of Bonn, Germany.

Mr. Dinn’s prior regional roles included Managing Director of a financial services technology multinational running greater-China business and consulting services for the Asia-Pacific region; Head of Technology Strategy for a super-regional business.

001-079 (4C) NEW_M5.indd 32 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

MR. THANA THIENACHARIYA MR. SARUNTHORN CHUTIMA Senior Executive Vice President, Chief Marketing Officer Senior Executive Vice President, Head of Special Business

Mr. Thienachariya has been appointed to the position Mr. Chutima serves as Senior Executive Vice President, Head of Senior Executive Vice President, Chief Marketing Officer of Special Business, which is responsible for monitoring of Siam Commercial Bank in 2017. Previously, he served and preventing the formation of new non-performing loans (NPLs), managing the bulk of the Bank’s portfolio as Acting Chief Marketing Officer and Chairman of the of NPLs and non-performing assets (NPAs), and providing Executive Committee of Digital Ventures, a subsidiary of practical advice on restructuring debts. He has 32 years the Bank, in 2016. of experience in corporate lending.

Prior to joining the Bank, he had served as a director of He joined the Bank after graduating from Chulalongkorn Singha Estate PCL and SF Corporation PCL during University with a Bachelor’s Degree in accounting and earning 2013-2016. He held a position of chief executive officer his M.B.A. from Ohio University, U.S. He managed project of the broadcast business of GMM Grammy PCL from finance and became Manager of Corporate Department 4, where he was responsible for corporate lending to the energy 2012-2013. In addition, he was chief commercial officer and petrochemical sectors prior to his appointment to ITV of Total Access Communication (DTAC) during 2010-2011. Co., Ltd. in 1996 as that company’s Managing Director and the Bank’s representative. After completing his mission to Mr. Thienachariya holds a Bachelor of Arts degree in divest the Bank’s controlling stake in ITV, he returned to the economics (Second Honors) from Chulalongkorn University Bank to resume his work with large corporate clients. He was and an M.B.A. degree from Washington State University, U.S. promoted as Executive Vice President, Corporate Division 1 in 2003. Subsequently, he was promoted as First Executive Vice President, Special Situations Group in February 2009 in order to provide practical advice for restructuring debts and develop a proactive and systematic framework to protect against new NPL formation for customers adversely affected by changes in the economic environment. He was promoted to Senior Executive Vice President in December 2010.

001-079 (4C) NEW_M5.indd 33 12/3/61 16:24 ANNUAL REPORT 2017

MS. PHANPORN KONGYINGYONG DR. ARAK SUTIVONG Senior Executive Vice President, Senior Executive Vice President, Chief People Officer Chief Strategy Officer and Company Secretary

Ms. Kongyingyong is a Senior Executive Vice President Dr. Sutivong holds a Ph.D. in Electrical Engineering from serving as the Chief People Officer. She had worked at Stanford University, California, U.S. and M.S. and B.S. in American Express (Thailand) for 12 years before joining Electrical and Computer Engineering from Carnegie Mellon GE in1995 to take on a wide range of roles across several University, Pennsylvania, U.S. Dr. Sutivong is currently the Chief units within the group, including GE Capital (Thailand), Strategy Officer of the SCB Group, responsible for overall GE Capital Auto Lease PCL, GE Money Retail Bank, and GE strategy and business development for the Bank, Company Money Asia. She joined Siam Commercial Bank in 2009 as an Secretary, and a board member of SCB Asset Management. Executive Vice President to work in Branch Network for the Retail Banking Group and was subsequently promoted to Dr. Sutivong joined SCB in 2010. He was appointed as Senior First Executive Vice President to head the Retail Segment Executive Vice President and Chief Strategy Officer in April and Branch Network in 2015. She was appointed the Chief 2017 and the Company Secretary in December 2017. Prior People Officer in April 2017. Ms. Kongyingyong holds a B.B.A to joining SCB, Dr. Sutivong had over 10 years of experience degree in accounting as well as an executive M.B.A. from with leading multi-national corporations. He was with Assumption University. McKinsey & Company in the Southeast Asia Office, where he had advised clients on strategy and corporate finance across multiple industries including telecommunication, technology, energy, and government, and prior to that with Qualcomm Inc., California, U.S. where he led wireless telecommunication R&D and had co-authored over 50 U.S. patents.

001-079 (4C) NEW_M5.indd 34 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

MR. SARUT RUTTANAPORN MR. NARONG SRICHUKRIN Senior Executive Vice President, Senior Executive Vice President, Head of Retail Segment and Branch Network Head of Wealth Segment and Head of Wealth Products

Mr. Ruttanaporn is a Senior Executive Vice President serving Mr. Srichukrin is a Senior Executive Vice President serving as the Head of Retail Segment and Branch Network. as the Head of Wealth Segment and the Head of His banking career began in 1996 as an investment banking Wealth Products. He has over 26 years of experience in the analyst at SCB Securities Co., Ltd. From 2000 to 2005, he banking industry, having worked at Citibank N.A., Thailand worked at Deutche Bank AG as the Head of Corporate for 14 years and subsequently at Standard Chartered Bank Coverage and Debt Capital Market and later joined JP (Thai) from 2003-2007. He joined Siam Commercial Bank Morgan Chase Bank where he led the team of Credit & in 2008 to work in the Alternate Channels, Sales and Service Rates Market Sales. He joined Siam Commercial Bank in Division in the Retail Banking Group. In 2015, he was 2009 as an Executive Vice President in Wholesale Banking appointed First Executive Vice President to lead the Auto Group and was subsequently promoted to First Executive Finance and Personal Loan Product. Mr. Srichukrin holds a Vice President as the Head of Corporate Segment in 2016. Bachelor’s degree in economics with honors from Thammasat Mr. Ruttanaporn holds a Bachelor of Arts degree in University and an M.B.A. in finance and banking from the economics from Boston University and an M.B.A. in Finance United States. from SASIN Graduate Institute of Business Administration.

001-079 (4C) NEW_M5.indd 35 12/3/61 16:24 ANNUAL REPORT 2017

MRS. PIKUN SRIMAHUNT MR. WASIN SAIYAWAN Senior Executive Vice President, Senior Executive Vice President, Head of Multi-Corporate Head of SME Segment Segment and Head of Corporate Segment.

Mrs. Srimahunt is a Senior Executive Vice President serving Mr. Saiyawan is a Senior Executive Vice President serving as the Head of SME Segment. She first joined Siam Commercial as the Head of Multi-Corporate Segment and the Head Bank in 1993 as a management trainee and later took a of Corporate Segment. He started his career in the full-time position as a commercial credit analyst specialized Treasury Department and had worked as a member of the in electronic and construction businesses. In 1996, she interbank dealing team at Siam Commercial Bank for 2 years. transferred to work with the real estate team in the In 1999, he joined Standard Chartered Bank (Thailand) where Corporate Division until 2008 when she was appointed he was in charge of FX sales and financial markets at the Senior Vice President responsible for residential mortgage regional level. He returned to Siam Commercial Bank products. With her wealth of banking experience and her in 2009 to join the treasury sales team of the Financial significant contribution on SCB gaining the highest market Markets Division and the Head of Commercial Banking share in the housing loans market, she was appointed the Solutions in 2015. Mr. Saiyawan holds a Bachelor of Arts Head of Mortgage and SSME Product in 2013 and became degree in economics from University of Kansas and an the Head of SME segment in 2017. Mrs. Srimahunt holds a M.B.A. in management from New Hampshire College. Bachelor’s degree in economics with honors from Chiang Mai University and a Master of Science degree in development economics from National Institute of Development Administration (NIDA).

001-079 (4C) NEW_M5.indd 36 12/3/61 16:24 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

MRS. PIMOLPA SUNTICHOK MRS. APIPHAN CHAROENANUSORN Senior Executive Vice President, Senior Executive Vice President, Head of Operations, Head of Commercial Banking Solutions Head of Retail Products, and Head of Retail Payments

Mrs. Suntichok is a Senior Executive Vice President serving Mrs. Charoenanusorn is a Senior Executive Vice President as the Head of Commercial Banking Solutions. She has serving as the Head of Operations, Head of Retail Products, over 20 years of experience in banking, having worked and Head of Retail Payments. Her professional background at Bangkok Bank PCL, Jardine Fleming Thanakom spans a wide range of roles from auditor, accountant, Securities Ltd., Fitch Ratings (Thailand) Ltd., and Standard project manager, finance and operations director. She Chartered Bank (Thailand). She joined Siam Commercial worked at Unilever Thai Trading for 15 years from 1993 to Bank in 2008 to lead the structured finance practice for 2007 and served as Operation Finance Director at the Capital Markets Division and became the Head of Tesco Thailand from 2007 to 2008. She joined Siam Corporate Segment in 2015 and the Head of Multi- Commercial Bank in 2008 to lead the Management Corporate Segment in 2016. Mrs. Suntichok holds a Services and Retail Operations Division of the Retail Banking Bachelor of Science degree in statistics from Chulalongkorn Group. In 2013, she became the Head of Retail Operations University and an M.B.A. from Eastern Michigan University. Division in the Technology and Operations Group and took the role of Head of Operations in 2015. Mrs. Charoenanusorn holds a Bachelor’s degree in finance and accounting with honors from Chulalongkorn University and an executive M.B.A. in business administration from Kasetsart University.

001-079 (4C) NEW_M5.indd 37 12/3/61 16:25 ANNUAL REPORT 2017

First Executive Vice President*

Ms. Araya Phuphanich Mr. Pornthep Panyarachun Ms. Auraratana Jutimitta Mr. Prakit Lohaprasert ML. Chiradej Chakrabandhu Mr. Rungsan Ongsaranakom Mr. Christian Roland Mr. Rungsi Vongkitbuncha Ms. Jamaree Ketrakool Mrs. Sakara Asvaraksh Mr. Kamalkant Agarwal Mr. Sakda Dumnakkaew Mr. Kiradit Arromdee Ms. Salisa Hanpanich Mr. Krieng Wongnongtaey Mr. Sanirat Ratchinda Mr. Pipat Assamongkol Ms. Saranya Vajakul Ms. Pitiporn Phanaphat Mr. Seksan Pornpairin Mr. Pongsit Chaichutpornsuk Mr. Seksom Intralawan Ms. Soramon Inkatanuvatana Mrs. Siribunchong Uthayophas Mr. Suthipat Serirat Ms. Siripen Olankijcharoen Mr. Trirat Suwanprateeb Ms. Siriporn Chuencharoenwong** Mr. Vishrut Jain Mr. Sirote Vichayabhai Ms. Vorada Thangsurbkul Mr. Siva Rkrishnan Mr. Woraphon Watunyuta Mr. Somkiat Kuvichitsuwan Mr. Worawat Suvagondha Mr. Somsakul Vinichbutr Mr. Sornchai Suneta 38 Executive Vice President* Mr. Srihanath Lamsam Ms. Suporn Sunthornrohit Mrs. Anisa Choocharn Mr. Sutirapan Sakkawatra Mr. Aphisak Kiewkarnkha Mr. Suwan Chaichanayotinvatchara Mr. Arpat Vijitakula Mr. Tanik Tarawisid Mr. Artapong Porndhiti Mr. Teerapol Rattakul** Ms. Chunpen Vitchichunthakhron Ms. Teerin Ratanapinyowong Mr. Ekkapol Apinun Mr. Thanawatn Kittisuwan Ms. Jittinun Chatsiharach Mr. Theeradate Sritarachiyanon Mr. Kaitchai Pullsuppasit Mr. Tiravat Assavapokee Mr. Kanin Rangkla Ms. Veena Lertnimitr Mrs. Kanognate Charoensedtasin Ms. Vipasiri Chantanumat Ms. Kanokwan Jaisri Mrs. Virasana Boonyasai Ms. Kluaymai Devahastin Mr. Vitoon Pornsakulvanich Mr. Kramol Pulkes Ms. Wannarat Phanjan Ms. Lalitphat Toranavikrai Mr. Manop Sangiambut Mrs. Metinee Jongsaliswang Ms. Nartruedi Punyaratabandhu Mrs. Natthakan Kanpachai * As of January 1, 2018 Mr. Nopadol Mungonchai ** Mr. Teerapol Rattakul has resigned from the Bank with effect Mr. Noppadon Boonmapajorn** from March 1, 2018 Mr. Paiboon Tangkanokpairoj Mr. Noppadon Boonmapajorn has resigned from the Bank Ms. Pakachat Taychaburapanone** with effect from April 1, 2018 Ms. Parichart Changprai Ms. Pakachat Taychaburapanone has resigned from the Bank Mr. Parnu Chotiprasidhi with effect from April 1, 2018 Ms. Pimjai Tongmee Ms. Siriporn Chuencharoenwong has resigned from the Bank Ms. Piyaahpa Charoenvej with effect from April 1, 2018

001-079 (4C) NEW_M5.indd 38 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

001-079 (4C) NEW_M5.indd 39 12/3/61 16:25 ANNUAL REPORT 2017

02 ORGANIZATION STRUCTURE

BOARD OF DIRECTORS 01 02 03 04 05 06 07 EXECUTIVE08 COMMITTEE 08

PRESIDENT AND CEO BOARD COMMITTEES MANAGEMENT COMMITTEES

Executive Committee Assets and Liabilities EIC Chairperson: Dr. Vichit Suraphongchai Management Committee Chairperson: Dr. Vichit Suraphongchai SCB Academy Audit Committee Risk Management Committee Chairperson: Mr. Prasan Chuaphanich Chairper son: Mr. Ar thid Nanthawithaya Audit Audit Committee 40

Nomination, Compensation, and Equity Investment Corporate Governance Committee Management Committee Technology Risk Strategy Marketing Chairperson: Dr. Chirayu Isarangkun Na Ayuthaya Chairper son: Mr. Ar thid Nanthawithaya

Corporate Social Management Committee Transformation Legal & Control Finance People Responsibility Committee Chairper son: Mr. Ar thid Nanthawithaya Chairperson: Khunying Jada Wattanasiritham

Compliance

MAJOR SCB GROUP COMPANIES SEGMENT PRODUCT CHANNEL SUPPORT

Retail Segment IB & CM Branch Network Operations Commercial SME Segment Digital Banking Facility Management Banking Solutions Wealth Segment Retail Products CSR and Internal Communication Multi-Corporate Segment Retail Payments 100% 100% 99.17% Corporate Segment Wealth Products OF OWNERSHIP OF OWNERSHIP OF OWNERSHIP International Banking Mortgage Products

Special Business

001-079 (4C) NEW_M5.indd 40 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

MANAGEMENT STRUCTURE

BOARD OF DIRECTORS EXECUTIVE COMMITTEE

PRESIDENT AND CEO

Corporate Social Management Committee Transformation Legal & Control Finance People Responsibility Committee Chairper son: Mr. Ar thid Nanthawithaya Chairperson: Khunying Jada Wattanasiritham

Compliance

MAJOR SCB GROUP COMPANIES SEGMENT PRODUCT CHANNEL SUPPORT

Special Business

001-079 (4C) NEW_M5.indd 41 12/3/61 16:25 ANNUAL REPORT 2017

BUSINESS OVERVIEW

3.1 THAI ECONOMY IN 2017 AND OUTLOOK FOR 2018 3.2 INDUSTRY AND COMPETITION REVIEW 3.3 STRATEGY AND BUSINESS OVERVIEW OF THE BANK AND ITS SUBSIDIARIES 3.4 AWARDS AND ACHIEVEMENT IN 2017

SCB Service Center

001-079 (4C) NEW_M5.indd 42 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

BUSINESS OVERVIEW

3.1 THAI ECONOMY IN 2017 AND OUTLOOK FOR 2018 3.2 INDUSTRY AND COMPETITION REVIEW 3.3 STRATEGY AND BUSINESS OVERVIEW OF THE BANK AND ITS SUBSIDIARIES 3.4 AWARDS AND ACHIEVEMENT IN 2017

001-079 (4C) NEW_M5.indd 43 12/3/61 16:25 ANNUAL REPORT 2017

3.1 THAI ECONOMY IN 2017 AND OUTLOOK FOR 2018

01 02 03 04 05 06 07 08 08

For the year 2018, SCB estimates that the Thai economy will continue to grow at 4.0%

In 2017, Thailand’s economy grew by 3.9%

001-079 (4C) NEW_M5.indd 44 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

In 2017, Thailand’s economy grew by 3.9%, which is a clear acceleration in private investment will be more pronounced indication of the country’s promising economic recovery. compared to the prior years. Another important factor that Other key economies around the world have also experienced may cause the Thai economy to grow at a faster rate than a rebound with the strength of the overall labor market forecast is foreign investment in the EEC project. This restored to the pre-financial crisis level in 2008. Moreover, the investment can result in quick and significant inflows with global economic expansion has increased international trade a potential to generate further economic activities beyond which directly benefits Asian exporters, including Thailand. the initial investment. Subsequently, the export sector has expanded across almost all categories with total export value growing at 9.9% which Improvement in private consumption has been limited to certain is the key reason behind the recent marked improvement segments which are high-income earners and First-Car Policy in the overall economy. Moreover, the export rebound has buyers who are now close to paying off their car loans which stimulated a gradual recovery in private investment after helped stimulate sales in automobiles, goods, and services prolonged contraction over the past three years. However, targeted at middle-class consumers. Moreover, the end the effect of export recovery has not fully trickled down to the of the mourning period will mark a return to normalcy labor market which has kept household consumption in for many sectors, such as event organizing, media, the doldrums. entertainment, and tourism among both Thais and foreigners. However, the overall purchasing power will be dampened For the year 2018, SCB estimates that the Thai economy by the stagnant labor market and high household debt will continue to grow at 4.0%, driven primarily by growth burden which also limits access to consumption loans. momentum in the export sector which will continue to benefit from favorable factors such as economic expansion SCB foresees four major risks in 2018. First, agricultural prices in key regions, growth in global IT spending, and relocation of will remain at a low level due to excess supply which will manufacturing bases of several Asian companies to Thailand. affect income for the majority of households and further 45 Similarly, tourism is expected to pick up after the mourning weaken the purchasing power. Second, Thai Baht appreciation period for King Rama IX and floods in many provinces with will hurt Baht-denominated revenues and competitiveness another contributing factor being the International Civil of Thai exporters. Third, shortage of high-skilled labor may Aviation Organization’s (ICAO) decision to remove halt the recovery of investment. Lastly, political uncertainties Thailand from its red-flag list. Government expenditure ranging from tensions in the Korean Peninsula, President is also expected to increase from investment in major Donald Trump’s fickleness, and political conflicts in many EU infrastructure projects with almost double investment countries, may cause a negative impact on the economy. outlay, the Eastern Economic Corridor (EEC) project, and the stimulus package targeted at low-income earners. Thailand’s financial conditions remain healthy despite tightening monetary policies worldwide. Going forward, liquidity in the Private investment is expected to accelerate in 2018 as global financial market will be lower as the Fed tightens the private sector starting to invest again after exports have US monetary policy, which may destabilize countries with picked up. In addition, there are signs of other positive high foreign debt as well as increasing the risk of financial factors contributing to investment, such as branch expansion asset revaluation, including the Thailand SET index which of major retailers, a return of real estate projects, and has rallied over the past year. However, Thailand’s overall investments in digital technologies by major corporations. economic stability is still considered sound given its large Moreover, e-commerce businesses, which have flourished foreign reserves and strong balance sheets of major Thai in recent years, will likely generate higher investment in corporations. Meanwhile, the policy rate is likely to remain a variety of sectors, including transportation, logistic, unchanged at 1.50% to support the economy that has yet warehousing, and digital technology to support online to gain full recovery coupled with low inflationary pressure. transactions and payments. The Bank expects that

001-079 (4C) NEW_M5.indd 45 12/3/61 16:25 ANNUAL REPORT 2017

3.2 INDUSTRY AND COMPETITION REVIEW

Global economic recovery has led to an expansion in Thai Thai commercial banking sector also grew at 4.8% and 6.2% in 01 02 exports03 which, in turn, boosted 04GDP growth in 2017 to be 052017 respectively, compared06 with 2.6% and 1.9% in 2016,07 with 08 08 higher than the prior year. Gross loans and deposits in the the majority of deposit growth coming from savings deposits.

Comparison of SCB’s Performance with the Thai Commercial Banking Sector* as at December 31, 2017 Unit: Baht billion

Thai commercial Consolidated Change SCB 2017 SCB’s market share % banking sector * % yoy 2017 2016

Assets 16,915 16,049 5.4 3,024 17.9 46 Gross loans 11,494 10,964 4.8 2,035 17.7

Deposits 11,634 10,953 6.2 2,092 18.0

Net profit 187 200 -6.7 43 23.1

* The Thai commercial banking sector as defined here consists of 11 commercial banks listed on the Stock Exchange of Thailand.

001-079 (4C) NEW_M5.indd 46 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Invested in digital technology

Response to changing Thai commercial banks continue to maintain a high level consumer needs of capital to accommodate future regulatory changes from the new accounting standards (IFRS) and new Basel capital requirements. Furthermore, changing customer needs toward digitization and new players entering the financial business have caused Thai commercial banks to face intensified competition from both bank and non-bank competitors. Going forward, Thai commercial banks will need to adapt quickly to constantly changing business For the overall sector performance, total income of Thai environment, be it from FinTech innovations, especially commercial banks grew at a moderate pace. Net interest in payments business which has to develop according to National e-Payment Master Plan, changes in the banking income (NII), which remained the main source of total income, 47 grew in tandem with loan growth and also benefited from business model which has become increasingly digitized, as efficient cost management, despite a one-time lending rate well as domestic and global economic and political cut in May. Net fee income of the sector continued to uncertainties. grow. In addition, many Thai commercial banks have invested in digital technology in response to changing consumer needs, causing operating expenses to outstrip income. Higher expenses coupled with higher prudent provisions and preparation for the new accounting standards to take effect in 2019 resulted in a decline in the sector’s net profit. Fin Tech The Thai commercial banking sector had a strong capital innovations position with total capital adequacy ratio (CAR) on a bank-only basis at 17.4% in 2017, which was higher than the minimum capital required under Basel III (Additional details on minimum capital requirement are shown in MD&A). In addition, many Thai commercial banks set aside higher provisions which raised the coverage ratio to 140% from 137% in 2016.

FinTech

001-079 (4C) NEW_M5.indd 47 12/3/61 16:25 ANNUAL REPORT 2017

The Bank’s consolidated net proﬁt stood at

Baht billion in 2017

Total loans grew by 4.9% from 2016

001-079 (4C) NEW_M5.indd 48 14/3/61 19:46 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

3.3 STRATEGY AND BUSINESS OVERVIEW OF THE BANK AND ITS SUBSIDIARIES

01 02 Background03 04 05 SCB Today 06 07 08 08 Siam Commercial Bank (SCB) was established by Royal Charter As a leading universal banking group in Thailand, SCB provides a as Thailand’s first indigenous bank on January 30, 1906. wide array of financial products and services to meet the needs Since its inception, the Thai Royal Family, and later the Crown of a broad range of customers. True to its status as a universal Property Bureau, has been the Bank’s major shareholder. Over bank, SCB has a large footprint across the financial service the past 110 years, SCB has played a pivotal role in shaping the landscape in Thailand covering all customer and product segments. country’s financial service landscape through many economic cycles and periods of political strife. Backed by strong support In addition to its core transactional services related to deposits of its major shareholder, the Bank has managed to emerge and loans, the Bank provides a comprehensive range of products from these changes as a bigger, better and stronger Bank. and services tailored to meet specific customer needs. Retail services include home loans, personal loans, car hire purchase, Following the Asian financial crisis in 1997, SCB undertook a credit cards, ATM cards, debit cards, currency exchange major recapitalization by joining the Ministry of Finance’s Tier 1 facilities and overseas remittances as well as investment and Capital Support Scheme (the August 14, 1998 Measure). bancassurance products. For corporate and business customers, As a result, the Ministry of Finance and the Crown Property the Bank offers cash management services, lending products, trade Bureau became the two largest shareholders of the Bank in finance, treasury products, bond and equity products, corporate May 1999. The Ministry of Finance subsequently established advisory, investment banking and other related financial services. the Vayupak Fund 1 and transferred a substantial part of its stake to the Fund on December 1, 2003. SCB’s major shareholders The Bank has three major subsidiaries to provide financial 49 as of December 29, 2017 were Vayupak Fund 1 (23.10%), the solutions that address customers’ specific needs: SCB Crown Property Bureau (19.61%) and the Ministry of Securities Co., Ltd.; SCB Asset Management Co., Ltd. and Finance (0.09%). SCB Life Assurance PCL.

Share of Revenue by Customer Segment

(Consolidated) 2017 2016 2015

Multi-Corporate & Corporate Segment * 20% 21% 20% SME Segment *, ** 14% 16% 14%

Retail & Wealth Segment * 54% 59% 57%

Others *** 12% 4% 9%

* Include revenue from major subsidiaries allocated to each segment accordingly. ** Include Small SME segment. *** Include Group Treasury, equity investments, subsidiaries and affiliates whose revenue is not included in the customer segments.

001-079 (4C) NEW_M5.indd 49 12/3/61 16:25 ANNUAL REPORT 2017

Performance in 2017 SCB Strategic roadmap

2017 was another challenging year for SCB as financial The financial service industry continues to face constant changes institutions continue to face technological changes, including from external factors such as shifts in customer behavior, rapidly evolving consumer needs. These changes prompted competition from digital players and fintechs, as well as the Bank to invest heavily in technology which is also part regulatory and government policy changes, which have of the Bank’s strategy to transform its organization and intensified over recent years. Specifically, rapid technological technology for transitioning into the digital era, causing advancement (e.g., Blockchain, Big Data Analytics, Artificial net profit to decline from the previous year. However, the Intelligence) has significantly changed the way people Bank still maintain the No. 1 position in terms of net profit. live and the way businesses are run. Today’s banking competition is no longer limited to competition among In 2017, the Bank’s consolidated net profit declined by 9.4% traditional banks as global technology players, including telecom from 2016 to Baht 43.2 billion, mainly due to higher prudent and fintech companies, starting to offer financial products and provisions to align existing expected loss principles to those services that compete with banks, blurring the boundaries of required under new accounting standard due to take effect the banking sector. Additionally, the banking business is also in 2019 as well as higher operating expenses from investment impacted by recent regulatory changes which will likely put in digital banking technology. Nonetheless, the Bank’s total income significant pressure on the Bank’s fee income. These shifts have increased 2.2% from 2016 mainly from growth in net interest prompted the Bank to rethink its business model to remain income, net fee income and net trading and FX income while relevant to customers and thrive under the new paradigm. 50 net insurance premium and gain on investments decreased from 2016. The Bank has embarked on the transformation journey since mid-2016 to further strengthen its leadership Total loans grew by 4.9% from 2016, in line with the position in the industry and achieve the vision of becoming Bank’s 2017 target of 4-6% loan growth driven by growth “The Most Admired Bank”. During its initial phase over in corporate and retail segments while SME loan volume the past 1.5 years, the Bank’s transformation program has remained unchanged. Non-performing loan ratio increased focused on creating strategic alignment and building strong to 2.83% in 2017 from 2.67% in 2016, while NPL coverage organizational foundations. Going forward, the Bank aims to ratio rose to 137.3% in 2017. Moreover, total capital be a technology-driven bank by adopting technology to lower adequacy under Basel III remained strong, at 17.7% of total cost base and capture revenue delta in new businesses as risk-weighted assets and common equity Tier I at 15.6%. well as uplifting customer experience. Therefore, in parallel with the ongoing foundation transformation, the Bank’s The Bank maintained its leadership in a broad range of focus will shift to transforming the organization and business products and services across customer segments, as well model to create agility and immunity to prepare the Bank for as a leading position in terms of network reach throughout the new paradigm under the “Going upside down” strategy the country. At the end of 2017, the Bank had 1,153 which comprises of 5 key strategic priorities listed as follows. branches, 9,560 ATMs, and 102 foreign exchange kiosks.

As a service business, keeping both employees and consumers highly engaged is the Bank’s top priority. These engagement levels have been assessed by third-party experts with proven methodologies which show consistently high levels of customer and employee engagement, giving the Bank a unique competitive edge and the best assurance of sustainable profitability.

001-079 (4C) NEW_M5.indd 50 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

1 Lean the organization 2 Digital acquisition

The Bank recognizes the importance of transforming the The Bank plans to build engagement and significantly expand business model to lower its cost base to keep pace with evolving its digital customer base. Although the number of traditional customer behavior and changing competitive landscape. branches is in decline, the Bank believes that, with changes in Lower costs can then be passed on to customers in a form of customer behavior and preferences, it can effectively engage lower fees which make the Bank’s services accessible to all groups and maintain customer satisfaction through a digital platform of customers. Key initiatives to lean the organization are: that can address every aspect of customer needs. Last year, the Bank redesigned its mobile platform (SCB Easy App) that • Encourage and ease customers’ transition to digital comes with a lifestyle application to better meet customers’ and automated channels through education and incentives, day-to-day needs. In addition, the Bank has developed and e.g., fees that reflect lower costs of these channels, which promoted QR code payment under the lifestyle payment also supports the government’s cashless society agenda. concept by launching “SCB Easy Pay – Mae Manee Money Solution” campaign during the last quarter of 2017. The QR • Leverage digital technology to improve internal processes code payment scheme, supported by the “Merchant App”, and streamline customer service procedures to optimize is designed for retail customers’ day-to-day spending on limited resources and ultimately uplift the customer experience. 5 target merchant groups: retail shops, universities, fresh markets, transportations, and temples. In 2018, the Bank plans • Significantly downsize its traditional branch network in to offer more comprehensive financial services by leveraging response to changes in customer behavior by considering new technology to create better customer experience in 51 growth potential, business size, transaction volume, the parallel with expanding non-financial service coverage number of branches or alternative service channels in the through strategic partnership to be part of customer’s everyday same area. In addition, the Bank plans to roll out new life. This effort will start from promoting C2C payment branch formats (i.e., Investment center, Business center, (retail customers to retail stores) through the ongoing “SCB Service center, and Express), shifting away from the Easy Pay – Mae Manee Money Solution” campaign and extending traditional one-size-fits-all branch model toward the coverage throughout the country, especially in big cities, customized service touchpoints for each customer such as Chiang Mai, Phuket, Hat Yai, Khon Kaen, and other major segment to address diverse customer needs with an economic cities. The Bank also continues to develop “Merchant emphasis on both transaction and financial/business App” capability to accommodate all forms of payment (QR advisory services. code, Payment card, Physical credit card/Virtual credit card, WechatPay and Alipay) with a plan to expand the merchant • Adequately downsize the workforce while preparing base to 500,000 participating stores. Moreover, the Bank also employees for the digital age and exponential growth in plans to bring in API gateway technology to connect with other digital transaction volume. The Bank has also created a business partners on customer lifestyles as well as using advanced plan to ease career transition of employees affected by analytics to better serve customers and increase accessibility branch closure which includes job assignment reviews to the Bank’s comprehensive lending services. The Bank plans and skill retraining. to increase the loan application channels for retail and SSME customers by introducing SCB Digital Lending on SCB Easy App.

001-079 (4C) NEW_M5.indd 51 12/3/61 16:25 ANNUAL REPORT 2017

3 High margin/alternative lending business 5 Bank as a platform

To enhance accessibility of the Bank’s lending services across Given drastic changes in the Bank’s ecosystem as mentioned all customer segments, the Bank plans to introduce alternative above, the Bank is in the process of exploring a new business lending options to customers, e.g., credit card, unsecured model which deploys technologies and data insights to ultimately personal loan, SSME loans. Since the Bank currently has become “Bank as a platform” for both businesses and small market shares in these loan products, the alternative consumers. The Bank focuses on customer engagement, directly lending business that offers high margins presents an attractive or indirectly through strategic partners, and building a business growth opportunity for the Bank. The Bank plans to redefine its ecosystem with bank as a platform to best meet customer business model to take advantage of this opportunity by needs and expectations. In addition, this new business model will leveraging technology to build new capabilities, including data generate valuable data which will enable the Bank to better analytics, while managing risk to be at an appropriate level. understand its customers and deliver products and services that meet their needs as well as creating better and more seamless experience. 4 Data capabilities

Examples of the Bank’s initiatives in this area implemented last year include collaboration with universities to create a cashless In the future, data will be the key to competitive advantage. society through “SCB Easy Pay – Mae Manee Money Solution” The Bank believes that data technology, such as big data campaign and “Merchant App” which allow students and analytics and machine learning, will deepen its insights on 52 university staff to pay for products and services on campus customer needs and behavior which will, in turn, enable the with the Bank’s app. Moreover, the Bank took part in a Bank to deliver the right products and services to customers. collaborative effort to revolutionalize the retail experience The Bank has started redesigning its data management system in the Retail 4.0 era under the “First Cashless Retail Experience” since the beginning of SCB Transformation including upgrading concept as part of the lifestyle solutions for consumers in the data storage system and building a data lake to improve the digital age. To create a cashless shopping experience, the data access for relevant functions, developing employees’ Bank installed Smart Self-checkout Kiosks that accepts QR code capabilities to leverage data for the Bank’s competitiveness, and payment and Smart Tax Kiosks that issue VAT refund documents deepening the data-driven culture across the organization. In for foreign tourists using only passports and receipts as well as its 2018 business plan, apart from expanding customer base issuing full tax invoices for Thai people using only national to benefit from additional data as mentioned above, the Bank ID cards. is also in the process of identifying new strategic partners to increase its access to non-financial data as well as exploring new Additionally, People and Culture foundation and Technology business models by making the best use of existing data, e.g. foundation are key enablers to support and drive success in the enriching the risk analytics system with customer behavior data. Bank’s transformation journey. As for people and culture, even Moreover, the Bank set up SCB Abacus as a wholly owned though digital technology will play a significant role in future subsidiary to focus on applying Artificial Intelligence technology service delivery, engagement between the Bank’s employees in the business operations. The new company has started to and customers will still be crucial and must be maintained. To explore providing data analytics services using the Bank’s this end, the Bank has set up SCB Academy to develop people existing data.

001-079 (4C) NEW_M5.indd 52 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

capabilities to prepare for changes in bank employee roles. To operate the business in parallel with its transformation Moreover, the Bank focuses on creating the mindset of putting program, the Bank remains committed to enhancing the current customers first for all bank employees as well as encouraging performance and creating sustainable growth by focusing on employees at all levels to trust and use their common sense the Bank’s 3 core businesses: business lending, consumer as a new approach to work. The Bank also places an emphasis lending and wealth management. Nonetheless, the Bank’s on reshaping the organizational culture to value speed and business model needs to incorporate new digital technology and agility, being goal-oriented rather than task-oriented, customer data capabilities in product and service delivery while maintaining centricity, being data-driven and tech-savvy. The Bank also places customer engagement to ensure the best customer experience. high emphasis on supervision and corporate governance within the organization to ensure that management practices adhere to • Business lending fair market conduct which constitutes one of consumers’ basic - Focus on rebalancing corporate portfolio to reduce loan rights. For technology investment, the Bank plans to drive digital and revenue concentration. innovation and focus on cyber security which involves both internal and external implementations. Internally, the Bank - Transform business model from “Fund provider” prepares for digital threats that may affect the Bank’s data and to become “SME ecosystem provider. ” operations by, for instance, developing protection system particularly for primary foundations and developing data - Grow SSME customer base by leveraging technology and privacy protection. Externally, the Bank invests in digital data capabilities. 53 technology through Digital Ventures, which is a subsidiary within SCB Group, to implement the strategy of extending • Consumer lending the boundary of disruptive technologies, such as Blockchain, - Increase customer acquisition, especially on the digital Big Data, Artificial Intelligence, Machine Learning, and platform, and increase main operating accounts by Location Based technology, which are playing important leveraging technology and data capabilities to create roles in the business world and financial services. The Bank better customer experience. looks for and learns from best-in-class technology/start-up companies for new product and service opportunities. - Grow new revenue stream by expanding into high-margin/ alternative lending business and leveraging technology The Bank believes that a business cannot grow sustainably and data capabilities in risk management to ensure by focusing solely on performance but must have an ability acceptable risk levels. to quickly adapt to changing business environment while striking the right balance in creating sustainable benefits - Lower cost to serve by leveraging automation to with fairness for all groups of stakeholders. The Bank has replace manual processes. improved its sustainability practices by integrating economic, social, and environmental considerations into its business processes as well as having clear, well-defined sustainability targets to ensure concrete and measurable outcomes.

001-079 (4C) NEW_M5.indd 53 12/3/61 16:25 ANNUAL REPORT 2017

• Wealth management Payment transaction banking, though generating less fee - Grow asset under management and profitability by income than in the past, will remain the Bank’s core service leveraging digital enablement. because of its strategic significance. Specifically, banking transactions facilitate customer engagement and generate - Build new wealth management capabilities to deliver valuable data for the Bank to analyze and apply the insights to world-class experience to customers, such as changing design products and services that truly meet customer needs. employees’ roles from sales officers to financial advisors, offering creative financial solutions that address customer needs, increasing the number of Investment Centers to provide better coverage, building a central product and service platform for the best customer experience.

54 Key Performance Targets for 2018

Loan growth of The Bank expects to deliver (compared to 4.9% in 2017). 6-8% competitive results, reflecting its sustainable Net interest margin (NIM) of performance and resilient (compared to 3.2% in 2017). 3.1-3.3% strategies. Key performance targets for 2018 are: Non-interest income growth (compared to -2.2% in 2017). �5%

Cost-to-income ratio of (compared to 42.3% in 2017). 42-45%

NPL ratio (compared to 2.8% in 2017). �3.0%

Coverage ratio (compared to 137.3% in 2017). �130%

001-079 (4C) NEW_M5.indd 54 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

001-079 (4C) NEW_M5.indd 55 12/3/61 16:25 ANNUAL REPORT 2017

Corporate segment

In 2018, the Bank will continue to focus on diversifying its corporate portfolio to reduce Diversify corporate portfolio revenue concentration for both new-to-bank and to reduce revenue 56 existing customers. The Bank plans to increase the concentration number of main operating accounts by creating a prototype for providing specialized services to broad-based customers, offering transactional Increase the number of main products, improving the Bank’s internal processes operating accounts and creating a single touchpoint. At the same time, the Bank will focus on maintaining its strategic partnership position with corporate customers and continue to be the lead in major financial Maintain strategic partnership deals for both government and private projects. position and be the lead in major financial deals

001-079 (4C) NEW_M5.indd 56 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

SME segment

In line with the long-term plan to significantly grow its SME franchise, the Bank continues its service commitment to Transform business model support SME customers to achieve their business goals. to become “SME ecosystem In 2018, the Bank plans to transform its business model provider” 57 for the SME segment and grow SSME customer base.

Key strategic initiatives include: Grow SSME customer base 1. Transform the business model to become by leveraging data capabilities “SME ecosystem provider”: and digital platform

• Be a service platform to help SME customers grow, e.g. providing business coaching, delivering integrated financial and non-financial solutions to address both business and personal needs.

• Create excellent customer experience through business centers and seamless onboarding processes.

• Develop the right product solutions and tools for customers.

2. Grow SSME customer base by leveraging data capabilities and digital platform.

001-079 (4C) NEW_M5.indd 57 12/3/61 16:25 ANNUAL REPORT 2017

Wealth segment

The Bank will focus on increase its wealth management capabilities to all customers with appealing value Increase wealth management proposition and introducing a new platform to capabilities to serve all 58 expand investment product offerings. The Bank plans customers to grow asset under management and profitability by adopting digital technology. Offer comprehensive service Key strategic initiatives for 2018 include: coverage through SCB 1. Deliver product and service solutions that address Investment center customer needs, e.g. retirement planning, asset management. Provide holistic wealth 2. Offer comprehensive service coverage at SCB management advice Investment Center, e.g. online seminars with investment experts, allocated space for investors to meet and share their investment/asset management ideas.

3. Increase capabilities of wealth advisors through intensive training and coaching by SCB Wealth Academy and leveraging digital advisory tools to offer holistic wealth management advice.

001-079 (4C) NEW_M5.indd 58 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Retail segment

In response to the Bank’s long-term “Going Upside 2. Create new revenue streams from high-margin/ Down” strategy, the Bank’s retail segment strategic alternative lending: priorities are to grow customer base, especially main operating accounts, and to create new revenue streams, • Identify customer needs and purchasing propensity 59 while lowering cost to serve by building technology with in-depth data analysis to pinpoint the right timing and data capabilities. for product offering and improve risk management.

Key strategic initiatives include: • Build digital capabilities to increase accessibility and 1. Grow customer base and increase main operating speed. accounts: • Re-design end-to-end lending processes to • Create customer value proposition and increase better serve customers with the right timing. customer loyalty with a loyalty program. • Enhance internal process e.g., early warning, • Enhance product value proposition with effective monitoring and debt collection capabilities. execution plan. 3. Lower cost to serve: • Improve digital/physical services to enhance customer experience and convenience. • Increase digital acquisition.

• Create ecosystem with strategic partners to • Increase automatic machines to facilitate customer expand customer base. migration from branch transactions to digital platform.

• Optimize service channels to better serve customers and keeping cost low at the same time.

• Revamp call service center as a key touchpoint to effectively serve customers.

001-079 (4C) NEW_M5.indd 59 12/3/61 16:25 ANNUAL REPORT 2017

SCB Securities Co., Ltd. (SCBS)

Established in 1995, SCB Securities Co., Ltd. is a brokerage arm and a 100%-owned subsidiary of SCB. The Company operates a securities business and offers equity products and services to institutional and retail investors. SCBS has won the trust of investors and has become one of Thailand’s leading securities companies with its head office at SCB Park Plaza and nine branches as well as an online channel (www.scbsonline.com).

In 2017, the market’s daily average trading value for equities (excluding proprietary trading) was at Baht 45 billion, down by 5% from Baht 47 billion in 2016. The main reason was lower trading volume by retail investors while trading volume of foreign and institutional investors increased from the prior year. Since equity trade commissions for institutional investors are generally lower than what retail investors are charged, a higher share of institutional trades has led to a decline in average trade commissions for the industry. 60 Despite fiercer competition from new entrants, SCBS was able to expand its customer base and capture a market share of 4.10%, an increase from 3.64% in 2016. Consequently, the ranking of SCBS among 38 brokers has improved by four notches to #7 from #11 a year ago.

SCBS is committed to continuous improvement in customer services by offering brokerage account opening services at all SCB branches countrywide with a streamlined process that requires only Thai citizen ID cards. Additionally, customers can also open an account online via Easy Stock which is a paperless service that can be completed in 15 minutes. SCBS responded to the digital trend by launching “Stock Advisor” which is a smart phone app for investment recommendations as well as expanding customer communication options to include online channels. In 2017, SCBS won the Best Brokerage House award and the Best Prime Broker in Thailand award from The Asset magazine (H.K.) for the third consecutive year, a strong testament to the Company’s commitment to service quality.

001-079 (4C) NEW_M5.indd 60 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

SCB Asset Management Co., Ltd. (SCBAM)

Ranking in Thailand in terms of asset under management No.1(AUM)

The Bank provides asset management services by offering products in the form of mutual funds, provident funds, and private funds through its wholly owned subsidiary, SCB Asset Management Co., Ltd. As of December 31, 2017, 61 SCBAM still maintained its No.1 ranking in Thailand in terms of asset under management (AUM) with total AUM of Baht 1.375 trillion (including mutual fund for resolving financial institution problems), up 5.2% from the prior year.

Solid investment performance and effective distribution channel through 1,153 bank branches nationwide have enabled SCBAM to gain a 17.8% market share in the mutual fund business, with AUM of Baht 897 billion, a 4.1% growth from the prior year.

AUM of the Company’s private fund business reached Baht 364 billion at the end of 2017 which amounted to a 12.1% growth year-on-year. SCBAM also manages a portfolio of property funds (Type I) and infrastructure funds with total AUM of Baht 145 billion. In 2017, SCBAM won SET Award of Honor for the third consecutive year and Best Asset & Fund Manager by Alpha SEA for the third consecutive year.

001-079 (4C) NEW_M5.indd 61 12/3/61 16:25 ANNUAL REPORT 2017

SCB Life Assurance PCL (SCB Life)

SCB Life is a 99%-owned subsidiary of the Bank. SCB Life’s life insurance market, as well as the continuation of a strategic primary business is life insurance underwriting, focusing decision by the Company to focus on protection products primarily on non-participating individual life, credit life and that are generally smaller ticket-size and stop the sale of health insurance products. These products are distributed certain tactical savings products given the prevailing low chiefly through the Bank’s branches and SCB Life agency offices. interest rates amid a volatile local and global investment environment. As at the end of 2017, SCB Life was ranked 5th out SCB Life reported total gross premiums of Baht 49.5 billion for of 22 life insurance companies (the same rank as the previous the financial year 2017, a 6.0% decline from the previous year. year) with an 8.2% market share in terms of total premiums. The decline was attributable to generally slower sales in the

001-079 (4C) NEW_M5.indd 62 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

001-079 (4C) NEW_M5.indd 63 12/3/61 16:25 ANNUAL REPORT 2017

3.4 AWARDS AND ACHIEVEMENT IN 2017

01 02 03 04 05 06 07 08 08 • Best Renminbi Bank • Best in Treasury and Working Capital • Best Risk Management Bank Awards and • Best Bond (Laos - Ministry of Finance) Achievements • Best Bond Adviser in 2017 • Best Corporate and Institutional Bank - Domestic 75 • Best Syndicated Loan (Vietnam - Petro Vietnam Gas) • Mining deal of the year (Thailand - Thai Kali Company) • Best FX Solutions for IRPC (Thailand)

BEST BANK IN THAILAND AWARDS FROM FINANCE ASIA (H.K.) • Global Finance (U.S.) (12th consecutive year) • Best Investment Bank (4th consecutive year) • Euromoney Awards (U.K.)(10th year) • Best DCM House • The Banker Awards 2017 (U.K.) • Finance Asia Country Awards (H.K.)(7th year) FROM ASIAMONEY (H.K.) • Alpha Southeast Asia (H.K.)The Asset Triple A - Country • Best Corporate and Investment Bank Awards 2017 (H.K.)(10th consecutive year) • Best Cash Management Customer Satisfaction Awards th 64 • AsiaMoney (H.K.)(4 year) 2017– Best Bank in Thailand • AsiaMoney - New Silk Road Finance Awards 2017 (H.K.) • Best Cash Management Customer Satisfaction Awards • Money & Banking Awards 2017 (14th year) 2017– Best Thai Bank for Asian Clients • Corporate Treasurer Awards 2017 (H.K.) FROM ALPHA SEA (H.K.) SCB was ranked No.1 among Thai Commercial Banks from • Best IPO Deal for Retail Investors in Southeast Asia 2017 “Forbes Global 2000” by Forbes Magazine (U.S.), Best Thailand • Best REIT Deal in Southeast Asia 2017 Enterprises by Business+ magazine and was awarded as • Best Foreign Currency Sovereign Bond Deal in Southeast “Thailand’s Top Corporate Brand Value – Hall of Fame 2017 Asia 2017 (Banking) by Chulalongkorn University’s Faculty of Commerce and Accountancy (for being the Top Brand for 5th consecutive FROM ASIA RISK MAGAZINE (H.K.) year) • House of the Year (5th consecutive year)

AWARDS OF EXCELLENCE IN FINANCIAL FROM GLOBAL FINANCE (U.S.) PERFORMANCE AND MANAGEMENT • Best Investment Bank (4th year) • Asia’s Best CEO by Corporate Governance Asia (H.K.) • Asia’s Best CFO by Corporate Governance Asia (H.K.) FROM EUROMONEY (U.K.) (6th consecutive year) • No.1 Market Leader in Thailand for Cash Management • Best Investor Relations Company by Corporate Governance Products and Services Asia (H.K.)(8th consecutive year) FROM THE EUROPEAN MAGAZINE (U.K.) AWARDS BY BUSINESS GROUPS • Best Transaction Banking Services – Thailand 2017 CORPORATE BANKING GROUP FROM THE STOCK EXCHANGE OF THAILAND FROM THE ASSET (H.K.) • Best Deal of the Year Award • Best Domestic Custodian (11th year) • Best Cash Management Solution for Thai Airways (Thailand) SME BANKING GROUP • Best Cash Management Solution for True (Thailand) • Best SME Bank by Alpha SEA (H.K.)(6th consecutive year)

001-079 (4C) NEW_M5.indd 64 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

RETAIL BANKING GROUP FROM The Asian Banker (S.G.) • Best Private Bank by Finance Asia (H.K.)(5th year) • The Social Media Initiative of the Year • Best Private Bank by The Asset (H.K.) • Global Private Banking Awards by The Banker (U.K.) FROM Thailand Zocial Awards 2017 • Best Domestic Private Bank (Thailand) by The Banker (U.K.) • The Best Brand Performance in “Twitter” platform • Best Wealth Manager (Thailand) by The Asset (H.K.) • The Best Brand Performance in the “Banking” category • Best Private Bank by Global Finance (U.S.)

• Best Private Bank for Super Affluent Clients by Euromoney OTHER AWARDS 65 (U.K.) • Best Affinity Co-Branded Program: Private Banker (S.G.) • DRIVE AWARD 2017 – Final List (Drive Award Finance): DIGITAL BANKING, MARKETING & SOCIAL MEDIA MBA Chula Alumni AWARDS • Certificate of Membership 2017: Thailand’s Private Sector FROM PRIVATE BANKER (S.G.) Collective Action Coalition against Corruption (CAC) • Best Client On-boarding Initiative • Sustainability Report Award 2017, Outstanding Category (Customer Experience in Financial Services 2017) from Sustainability Report Award 2016, organized by CSR • Best Brand Engagement Club Thai Listed Companies Association (Customer Experience in Financial Services 2017) • Thailand Sustainability Investment 2017 member, organized • Best Customer Experience - Cards by The Stock Exchange of Thailand (SET) (Customer Experience in Financial Services 2017) • SCB has been included in RobecoSAM’s Sustainability Year • Best Product or Service Innovation book 2018 (Customer Experience in Financial Services 2017) OTHER COMPANIES IN SCB GROUP FROM RBI ASIA TRAILBLAZER (S.G.) • Best Social Media Marketing Campaign 2017 SCB Securities Co., Ltd. • Excellence in Social Media and Customer Relations and • Best Prime Broker (Thailand) by The Asset (H.K.) Brand Engagement 2017 (3rd consecutive year) • Best New Product, Service or Innovation Launch 2017 • Best Brokerage (Thailand) by The Asset (H.K.) • Best Broker in Thailand by Finance Asia (H.K.) FROM The Asset Triple A Digital Awards 2017 (H.K.) • Digital Bank of the Year, Thailand SCB Asset Management Co., Ltd. • Best Retail Mobile Banking Experience, Thailand • SET Award of Honor (3rd consecutive year) • Most Innovative ATM Project, Thailand, (Cardless ATM) • Best Asset & Fund Manager by Alpha SEA • Most Innovative Mobile Banking Application, Thailand, (3rd consecutive year) (SCB Easy) • Digital Banker of the Year (Mr. Tana “Tommy” Pothikamjorn)

001-079 (4C) NEW_M5.indd 65 12/3/61 16:25 ANNUAL REPORT 2017

RISK MANAGEMENT AND RISK FACTORS

001-079 (4C) NEW_M5.indd 66 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

04 RISK MANAGEMENT AND RISK FACTORS

01 02 03 Risk04 Management 05 06 Risk Management07 System 08 08 SCB’s strong performance in the past few years has been SCB’s risk management system has four major components: accompanied by significant expansion in assets, customer base, and workforce. As the Bank’s operations grow in 1 Risk identification complexity and size, the Bank must shift its priority toward sustainability. Moreover, the Bank’s past success has also ratcheted up the expectations of customers, shareholders, Major risks of the Bank involve transactions and activities with and other stakeholders. Against this backdrop, the Bank customers and counterparties. These risks are strategic risk, believes that effective risk management will continue to credit risk, market risk, interest rate risk in the banking be the key to sustainable growth and profitability. book, liquidity risk, operational risk, reputational risk, RISK MANAGEMENT people risk and technology risk. These risk categories are Risk management aims to create long-term stability for the discussed in detail below in the “Key Risk Factors for the business to achieve its goals within the risk appetite as well Banking Business” Section. as mitigating risks in critical or uncontrollable situations. AND RISK FACTORS SCB is committed to developing and strengthening its 2 Risk measurement entire risk management system, starting from risk identification, risk measurement, risk monitoring and control, and risk reporting, to be prepared for any current To measure each type of risk, the Bank employs a wide range and future changes. The backbone of SCB’s risk management of quantitative and qualitative methods based on internal consists of the policy formulation process, implementation ratings-based approaches and/or other appropriate internal 67 framework, and the audit process in parallel with models: building a risk culture by empowering people with • For credit risk, measures include borrower risk ratings knowledge and accountability to all participate in risk to gauge the probability of default (PD). The Bank management. applies credit scoring, such as application scores and behavioral scores to assess risk profiles of retail clients SCB’s overall risk management structure, policy, and and small SMEs. In addition, the Bank has developed system comprise the following: risk models to estimate loss given default (LGD) and exposure at default (EAD). For derivative products, the Bank relies upon the potential future exposure (PFE) methodology to measure credit risk exposure.

• For market risk, measurements include both statistical tools, such as value at risk (VaR), and non-statistical methods, including risk-factor sensitivity analysis, position measures, and stress testing for trading book exposures.

• For interest rate risk in the banking book (IRRBB), the Bank measures the risk of interest rate fluctuations by measuring the impact on net interest income and economic value of equity (EVE) under assumptions of interest rate fluctuation in stress situations.

• For liquidity risk, the measures cover balance-sheet structure, cash flows of assets and liabilities, and off-balance-sheet items. The Liquidity risk measurements include liquidity ratio, maximum cumulative outflow (MCO) as well as the recently introduced liquidity coverage ratio (LCR) under Basel III rules.

001-079 (4C) NEW_M5.indd 67 12/3/61 16:25 ANNUAL REPORT 2017

• For operational risk measurement, the Bank uses risk and Risk Governance Structure control self-assessments as well as loss incident data to determine operational risk and internal control The risk governance structure comprises 5 key following effectiveness for each function. Moreover, as part of its components: risk mitigation process, the Bank has established a business continuity plan (BCP) to ensure continuity of 1 Policies key activities during any crisis event that may cause business disruptions. The Bank’s operational risk management approach requires all new products The Board of Directors has the responsibility to review and any material changes to existing products to and approve the Bank’s major risk management policies, undergo a risk profile review. This approach ensures such as Risk Management Policy of SCB Financial Group, that operational risk remains within the Bank’s risk appetite Intra - SCB’s Financial Group Transaction Policy, Credit to reduce the impact from potential operational risk events. Policy Guide, Internal Capital Adequacy Assessment Process Policy (ICAAP Policy), Stress Testing Policy, • For strategic risk, the Bank‘s assessments are primarily Market Risk Policy, Trading Book Policy, Interest Rate Risk in based on qualitative risk factors and quantitative the Banking Book Management Policy, Liquidity Risk economic indicators. Management Policy, Operational Risk Policy, and Business Continuity Management Policy. • For reputational risk, technology risk, and people risk, the Bank mainly applies risk analysis, including In addition, the Board of Directors approves two other key 68 quantitative and qualitative risk management related guidelines which are Strategic Risk Management Guidelines and Reputational Risk Management Guidelines. To implement forward-looking risk management, the Bank also performs stress-testing in addition to other risk 2 Authority measurement tools, particularly for market risk, credit risk, and liquidity risk. The Board of Directors has the responsibility to delegate 3 Risk monitoring and control approval authority to management and other committees. The authority includes credit approvals and decisions to underwrite different types of risks based on the underlying The Bank establishes a Risk Appetite Statement (RAS) that risk level (risk-based authority). is aligned with SCB Group’s long-term goals to guide its overall risk considerations and controls. The Bank regularly 3 Committees with significant roles in reviews its capital adequacy, as well as monitoring and risk management controlling risk by establishing key risk indicators and risk limits for the exposure faced by the Bank at different levels: organization-wide, customer, product, transaction and 3.1 The Board of Directors has delegated risk management others. The Bank has an internal control process to manage duties to three committees as follows: risks in accordance with the Bank’s policies and procedures. 3.1.1 The Executive Committee is responsible for 4 Risk reporting reviewing and making recommendations on risk management policies for the Board’s approval as well as approving certain policies as delegated Risks in all categories are reported promptly and by the Board of Directors. In addition, the Executive accurately to relevant functions and management on a Committee is authorized to approve loans and regular basis to ensure effective risk management and investments and to administer related functions control. Risk reports are created at the product level, as assigned by the Board of Directors. the function level, and for the overall risk of the Bank.

001-079 (4C) NEW_M5.indd 68 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

3.1.2 The Audit Committee comprises independent Committee or the Board of Directors for directors who are responsible for reviewing approval on cases of high-risk transactions or when the adequacy of the Bank’s risk management underwriting limits exceed its approval authority. policies, internal control, and the effectiveness of the Bank’s and SCB Group’s risk management 3.2.5 Other committees, such as the Investment implementation. Committee.

3.1.3 The Risk Management Committee is responsible 4 Risk Governance for reviewing and making recommendations on risk management policies and frameworks for risk management and control to the Executive 4.1 Credit risk governance Committee and the Board of Directors for The Bank has long emphasized the importance of proper approval. The Committee also formulates risk checks and balances in its organizational structure by management strategies to be consistent with separating business functions and credit approval the Board’s guidance and oversees the Bank’s and functions for effective internal control. Credit approval SCB Group’s overall risk management. authority is determined in accordance with risk level or expected loss, which will depend on credit line, 3.2 The Bank set up other committees to manage specific borrower risk rating, and severity class. For areas of risk: non-retail credit, the Bank assigns approval authority to both credit committees and individuals. For retail credit, 3.2.1 The Assets and Liabilities Management Committee the Bank monitors and controls retail lending through 69 is responsible for managing market risk, interest the established Credit Policy Guide and approval rate risk, and liquidity risk. authority as well as underwriting criteria approved by the Executive Committee or the Retail Credit Committee. 3.2.2 The Equity Investment Management Committee Additionally, the Bank assesses and measures is responsible for managing risk on the Bank’s credit risk by product and customer segment as well. equity investment portfolio. 4.2 Market risk governance 3.2.3 The Credit Committee, Retail Credit Committee, The Bank sets a variety of market risk limits for its trading and Special Assets Committee are responsible portfolios which have been approved by the Executive to approve loans within their approval authority. Committee and the Board of Directors. For the Bank’s Any loans exceeding the committees’ authority key market risks which are interest rate risk and foreign levels require approval from the Executive exchange risk, the Committee sets risk limits for trading Committee and the Board of Directors as set positions based on information from a number of risk forth in the Rules on Credit Approval Authority monitoring and assessment tools such as value at risk (VaR), and the Rules on Credit Approval Authority risk sensitivity measures (basis point value), position measures, for Non-performing Loans and Non-performing and stress testing. In addition, trading portfolio performance Assets. However, loans for Bank-related is monitored and controlled by using management action businesses, major shareholders, or related triggers (MAT). persons must be approved by the Board of Directors. Loans viewed by the Executive 4.3 Interest rate risk in the banking book (IRRBB) Committee as contentious with potential governance reputational risk may be escalated to the Board The Bank sets risk limits for IRRBB by measuring impact for approval as deemed appropriate. of net interest income and economic value of equity (EVE) to interest rate fluctuations under stress situations. 3.2.4 The Underwriting Risk Committee is responsible To monitor IRRBB, the Bank produces repricing gap for reviewing and approving underwriting limits reports for risk analysis and risk assessment. This analysis, based on market risk considerations. The Committee assessment, and risk management strategies are then makes recommendations to the Executive reported to the Assets and Liabilities Management Committee (ALCO) for further actions

001-079 (4C) NEW_M5.indd 69 12/3/61 16:25 ANNUAL REPORT 2017

4.4 Liquidity risk governance management process). The last line of defense, which The Bank manages and controls liquidity risk to ensure that is under the responsibility of the Audit Division, provides it maintains adequate sources of liquidity in order to assurance to the Audit Committee and the Board maintain sufficient future cash flows to cover its activities of Directors that the Bank and SCB Group companies under both normal and stress situations by using Cash flows have effective control measures for people risk. report or Liquidity gap report to monitor and control the Bank’s overall liquidity risk. The Bank’s policy For risk management of SCB Group, the Bank as is to maintain the liquidity ratio (liquid assets as the core company has an oversight responsibility a percentage of total deposits) and Liquidity Coverage for the risk management of subsidiary companies. Ratio (LCR) at an appropriate level and to zmonitor net cash outflows over different time horizons to ensure The Bank’s subsidiaries are responsible for establishing that the Bank will be able to meet its liquidity needs on risk and internal control policies and practices to ensure a timely basis. effective risk management at an equivalent level to the Bank and consistent with the Bank of Thailand’s guidelines 4.5 Operational risk governance on consolidated supervision. The Board of Directors has The Bank has adopted the “Three Lines of Defense” as approved the Risk Management Policy of SCB Financial a core principle in its risk management practices. Group which requires each subsidiary to: formulate a risk Front-line business functions constitute the first line of management policy, set up an appropriate organizational defense by applying the risk management and control structure, set risk tolerance limits, establish risk management principles to their day-to-day operations. The second line approaches, and prepare risk reports as specified by the 70 of defense is made up of the oversight functions (e.g., Risk Bank’s risk management guidelines which depend on the Management Function, Compliance Functions, etc.) to nature of its business. ensure that all business functions have effective risk management practices. The third line of defense For Intra - SCB’s Financial Group Transaction Policy, the Bank comprises independent assurance providers (e.g., internal follows the principle of good governance by requiring that audit and other independent assurance providers), who these transactions be conducted under no special terms and provide independent review and objective assurance on conditions. Any company that is wholly owned or substantially the effectiveness of the Bank’s internal control system. owned by the Bank, which is considered equivalent to the Bank’s business unit, can use the Bank’s shared services/ Additionally, the Risk Management Function holds regular resources or provide services to the Bank at prices, terms meetings with business-level committees to discuss and conditions that are reasonable and acceptable to operational risk issues as well as providing risk both sides. management information to management across key functions to facilitate their business decision-making. 5 Chief Risk Office

4.6 People risk governance The Bank applies the “Three Lines of Defense” to manage The Chief Risk Office, which reports directly to the people risk in the same manner as that of operational risk. President and Chief Executive Officer, is responsible for The first line of defense involves the People Function, setting risk management framework, making risk policy business functions, and relevant support functions. recommendations, as well as reporting and monitoring major The second line of defense involves a shared service group types of risk. The Chief Risk Office is responsible to bring which is responsible for providing recommendations, the Bank’s risk management policies and practices up to supports, alerts, and testing for approaches adopted global standards and to ensure that the Bank and its by the People Function to manage people risks. The shared subsidiaries have a comprehensive and integrated risk service group comprises Operational Risk Management, management framework. Moreover, other relevant functions Compliance and Operational Control, Technology Security are responsible for specific risks; for example, the Chief Financial & Risk, Fraud Control, and others. Lastly, the third line of Office is responsible for liquidity risk and interest rate defense is carried out by independent units which risk in the banking book (IRRBB); the Chief People Office will conduct tests on processes and procedures set out is in charge of people risk; and the Chief Strategy Office by the People Function (including the people risk handles strategic risk.

001-079 (4C) NEW_M5.indd 70 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Key Risk Factors for the Banking Business To manage risk from economic uncertainties, SCB regularly monitors borrowers’ credit quality to ensure adequate Risks from economic uncertainties provisions for non-performing loans. In addition, the Bank closely monitors loan concentration in the portfolios to The expansion of Thailand’s economy in 2017 was largely due take prompt actions in the event of an economic downturn. to a strong rebound in the export sector. However, the benefits The Bank has also created a stress-testing process to appraise of this rebound have not yet translated into higher purchasing capital adequacy which is part of the ICAAP requirement by power among low-income households. Moreover, the country’s the Bank of Thailand. economy is still vulnerable to flood and foreign political risks. 1 Credit Risk SCB expects that the Thai economy will grow by 4.0% in 2018, propelled in large part by exports, tourism, and the ongoing public investment in large-scale projects, which will 1.1. Concentration risk lead to recovery in the private sector. Moreover, private-sector Concentration risk relates to any single exposure or group of consumption will pick up in certain income levels and exposures in an entity or a business sector with a potential product groups, such as high-income earners and close to to produce large losses for the Bank if problems arise in that one million First-Car Policy buyers who now approach the entity or sector. The Bank manages credit concentration end of their car loan payments. Moreover, the post-mourning risk by setting concentration limits based on loss potential period and the government welfare card scheme will for each borrower group. Specifically, the Bank controls also contribute to higher spending in the private sector. and monitors the following ratios: 71 Potential risk to the domestic economy will depend on how • Lending, investment, contingent liabilities, or lending-like fast the government’s budget translates into actual spending transactions with any major borrower and related and the clarity on terms of benefits, rights, and regulations of parties or project must not exceed, without regulatory large-scale public investment projects. Particularly, the Eastern approval, 25% of capital of full Consolidation companies. Economic Corridor (EEC) project will be a pivotal factor for determining investor confidence level among both Thai and • The sum of lending, investment, contingent liabilities, or foreign investors. Similarly, domestic investment is also subject lending-like transactions with all major borrowers and to additional risk of labor shortage for both foreign and related parties, of which total debts exceeding 10% of high-skilled workers. Household debt remains high and the Bank’s total capital, must not exceed three times concentrated among low-income earners which may delay the Bank’s total capital. the recovery of household spending. Moreover, there is still lingering risk from Thailand’s elusive general elections Additionally, the Bank requires that lending is not concentrated and thus uncertainty around future economic policies in any specific industry. This is determined from industry that may affect investor confidence. trends, business opportunity, probability of loss, and probability of default. The Bank has applied statistical tools As for external risks, geopolitical conflict still looms large as a to determine industry limits, such as the Herfindahl-Hirschman major source of concern. The main risk revolves around Korean Index (HHI), which is an index adopted for measuring Peninsula conflict which, though a low-probability event, will deal industry concentration. a detrimental blow to the global economy and trade in the worst-case scenario. Moreover, political risks from the previous 1.2. Counterparty risk year continue to be a concern, ranging from President Donald Counterparty risk is the risk of losses from counterparties Trump in the US, the anti-EU sentiment in Italy, Catalonia’s violating the contract agreements particularly for secession movement in Spain, political battles in Germany, to derivatives contracts, such as interest-rate swaps, currency the unresolved Brexit. Moreover, there are signs of trouble swaps, equity instruments, and forward rate agreements. in the finance sector as global financial markets rebounded Generally, the Bank enters into derivative contracts sharply last year amid contractionary monetary policies with customers who need to square their positions and worldwide which increase the risk of asset price normalization. minimize their risk exposure. To keep market risk exposure under the limit, the Bank may hedge its risk exposure in part

001-079 (4C) NEW_M5.indd 71 12/3/61 16:25 ANNUAL REPORT 2017

or whole by entering into off-setting agreements execution 13.0%. The Bank manages its NPL risk by (back-to-back) with foreign banks in the OTC derivatives setting aside adequate loan loss provisions for expected markets which creates counterparty risk with these banks. losses. At the end of 2017, the Bank had total loan loss provisions of Baht 89,227 million, covering 138.3% of NPLs. The Bank sets a risk limit for each counterparty based on the same underwriting process as credit customers. 1.5. Off-balance-sheet risk To determine counterparty limits, the Bank takes into To adhere to the Generally Accepted Accounting Principles, consideration the counterparty’s credit ratings and its level some of the Bank’s obligations with customers and of Tier 1 capital. The Bank also establishes a sovereign counterparties are classified as off-balance-sheet items limit for each country. For risk monitoring, the Bank which have underlying counterparty risk and market closely monitors counterparties’ credit conditions based risk from the event of contractual failures. However, on aggregate exposure, credit default swap (CDS) spread, both sides of the contracts can face losses as a result this risk, changes in credit ratings, and changes in equity prices. unlike general credit risk in which losses are often one-sided. This information is reported to senior management on a daily basis as input to assist with keeping the risk level At the end of 2017, the Bank’s obligations from aval and within the Bank’s risk appetite during normal and stress guarantees, liabilities under unmatured import bills, and situations. letters of credit amounted to Baht 47,721 million, down by 24.9% from the year before. To mitigate counterparty risk, the Bank signs ISDA credit support annexes (CSA) with its major counterparties To manage off-balance-sheet exposure, the Bank treats such 72 which require posting collateral in the form of cash or highly obligations as a form of loans and business units are liquid securities when the contract’s fair market value required to follow the normal credit approval process. changes more than the threshold. The Bank controls this risk by setting counterparty risk limit for each customer along with country risk limit. Monitoring 1.3. Country risk is also done by keeping abreast of current situations and The Bank monitors its exposure to both direct and related information. To quantify credit equivalent indirect country risks by assessing loss probability within amount of an off-balance-sheet item, the Bank computes an appropriate time horizon in an event of adverse the current exposure based on mark-to-market prices plus conditions to the country or to businesses in that country. an add-on factor. The Bank manages country risk by setting a policy limit and a country limit for each country, based on a sovereign The Bank also controls its derivatives risk exposure to scorecard and external credit ratings. market volatility by setting limits using a variety of risk indicators, such as VaR, risk sensitivities including 1.4. Non-performing loan (NPL) risk (bank basis) option greeks, loss action triggers, and stress testing. NPLs arise when borrowers fail to repay their debts according to the agreed schedules which may cause 1.6. Risk from impairment in value of real property the Bank to lose not only interest income, but sometimes collateral part of or the entire principal, with an impact on Because most collateral is in the form of real estate, a the Bank’s profitability and capital adequacy. sluggish property market and lower house prices will negatively affect the value of the Bank’s collateral which At the end of 2017, Bank-only NPLs stood at Baht 64,537 may result in higher losses from NPLs. The Bank has million, or 2.8%, up in absolute term and in percent term established the Collateral and Non-Performing Assets of total credit, from Baht 56,544 million, or 2.6%, in 2016. Appraisal Policy as part of the Credit Risk Management (Further explanation on NPLs is provided in the MD&A Policy to ensure that collateral and NPA values reflect section.) These NPLs can be classified into four categories: fair market values, especially for setting loan loss provision, restructured debts 66.2%, debts pending completion of capital calculation and debt restructuring. restructuring negotiations 5.8%, debts pending the outcome of legal proceedings 15.0%, and debts pending legal The Bank has managed impairment risk through the Collateral and Non-Performing Assets Appraisal Policy as

001-079 (4C) NEW_M5.indd 72 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

mentioned above which requires collateral for credit lines 2.2. Interest rate risk exceeding Baht 20 million to be reassessed every five Interest rate fluctuation affects the Bank’s interest income years. Collateral for non-performing loans (NPLS) is and expenses, and economic value of equity. The Bank reassessed every three years unless there is a decision to faces four types of Interest rate risk: be made which depends on collateral value, such as • Repricing risk is the risk from maturity/timing trouble loan restructuring. In that case collateral value must mismatches of the Bank’s assets and liabilities which be reassessed within one year to reflect fair market value. cause interest rates at reset to differ due to yield curve For non-performing assets, collateral is re-appraised every year. movements. For example, assuming all other factors being constant, if the Bank’s assets can be repriced faster For the choice of appraiser, the Bank is authorized by than liabilities (a positive gap), interest margins the BOT to use its internal appraiser for loans of any increase when interest rates rise. On the other hand, size. To ensure transparency and prevent conflicts of if the Bank’s ability to reprice assets is slower than liabilities interest, the Bank’s internal appraisal process is (a negative gap), then interest margins narrow when independent from the credit approval function. interest rates rise. The Bank’s internal appraiser is responsible for monitoring • Yield curve risk arises from interest rates at different property price movements in the market on a regular basis maturities changing differently. and notifying the Bank promptly if property prices have • Basis risk occurs when the Bank’s assets and liabilities changed more than 20% within a year so that the Bank are based on different reference interest rates, e.g., can take further actions on reappraisal. fixed-deposit rates, interbank lending rates, THBFIX interest rates, etc. Therefore, any change in reference 73 Market Risk and Interest Rate Risk in the rates will affect interest rates tied with assets and 2 Banking Book (IRRBB) liabilities differently. • Options risk arises from implicit and explicit options in the Bank’s assets and liabilities and off-balance-sheet 2.1. Foreign exchange risk items where exercising these options might affect the Fluctuation in exchange rates affects the value of the Bank’s revenue and costs. For example, an option on Bank’s foreign currency-denominated assets and liabilities. three-month or six-month deposits that allows early Transactions exposed to foreign exchange risk include withdrawal before maturity will, if exercised, cause the proprietary trading transactions and money transfers as well Bank’s costs to rise sooner than expected. as payments related to international trade and foreign investment, which may result in the Bank’s net currency To manage its interest rate risk, the Bank sets risk tolerance position being short or long at any point in time. Thai baht limits for both the trading book and banking book. For appreciation against the currency in which the Bank has a net trading book exposures, there are limits on VaR, sensitivities long position will result in foreign exchange losses, whereas to yield curve and basis shifts (basis point value), and stress Baht depreciation will result in foreign exchange gains. testing. For banking book exposures, limits are determined On the other hand, if the Bank is in a net short position, based on percentage of income and capital. the Bank will make a gain on the position when Baht strengthens but a loss when Baht weakens. As of December 31, 2017, VaR of interest rate risk exposure in the trading book was Baht 66.14 million. For the banking The Bank controls foreign exchange risk by setting risk limits book, a 1% increase in interest rates for a period of one year on foreign exchange risk exposure both in terms of would decrease net interest income by Baht 1.21 billion. statistical limits, such as VaR, and monetary limits, such as net open position, open position by currency, management 3 Liquidity risk action triggers, etc.

As of December 31, 2017, the Bank’s foreign currency Liquidity risk is the risk that the Bank is unable to honor its position was long USD 52.93 million (USD equivalent) obligations upon maturity because it cannot liquidate assets or with VaR of Baht 41.82 million. raise sufficient funds on reasonable terms, which may create losses.

001-079 (4C) NEW_M5.indd 73 12/3/61 16:25 ANNUAL REPORT 2017

To manage the underlying liquidity risk, SCB has laid out a relevant information has been appropriately incorporated Liquidity Risk Management Policy which is approved by the into the Bank’s strategy planning while the strategic risk Board of Directors. The Asset and Liability Management of the assessment and monitoring process monitors changes in Bank is responsible for ensuring that liquidity risk management external and internal factors that may affect the business. complies with the policy. At present, the Corporate Strategy and Business Development Additionally, SCB has implemented a system to handle daily Function is responsible for both the strategic risk assessment liquidity management in both baht and foreign currencies. process and the strategic planning process with key duties The system applies various risk management tools, such to support the Board and senior management in strategic as daily net liquidity position reports for both remaining time formulation and review. to maturity and behavioral adjustment basis, net liquidity position by currency, and others. Moreover, SCB sets risk 5 Operational risk limits and requires daily reporting of liquidity risk exposure to management to ensure that liquidity risk remains within the Bank’s risk appetite. The Bank defines operational risk, based on Basel II’s definition, as the risk of losses resulting from inadequacy or The Bank also regularly performs stress testing under failure of internal processes, people, and systems or from scenarios set out by the Bank of Thailand and SCB. Results external events which also includes legal risk, and impact on from the test are used as part of the formulation of a reputation from operational risk, but excludes strategic Contingency Funding Plan. The plan sets out appropriate risk. (Details on reputational risk are in item 6 below). 74 guidelines under various circumstances and clearly specifies Operational risk factors can arise from both internal and roles and responsibilities for liquidity management under external environments, such as changes in key personnel, critical situations. organizational structure, processes, systems, products, natural disasters, riots, etc. The Bank has a policy to maintain its daily liquidity ratio at 20% or higher, measured as total liquid assets to total deposits. The Bank realizes that the business must face operational At the end of December 2017, the Bank‘s liquid assets risk and therefore places great emphasis on operational represented 26.9% of total deposits which is reassuring that risk management and has continually improved this crucial there will be adequate liquidity under both normal situations process over time. and crisis scenarios. Business and support functions within the Bank are 4 Strategic risk responsible for managing their operational risk by applying the methodologies and approaches that the Bank has adopted. Each function performs a risk and control Strategic risk refers to the risk on the Bank’s profits, capital, self-assessment (RCSA) which entails identifying key risks, or stability both now and in the future that arise from changes evaluating the effectiveness of controls, and establishing in the business environment, adverse strategic decisions, action plans to mitigate or prevent these risks to be within improper implementation of major strategies, or untimely the level of risk appetite appropriate for each function. responses to industry, economic and technological changes. The Bank has reviewed the previous RCSAs and identified key risks at the Bank level for which senior management The Board of Directors has adopted strategic risk management must establish mitigation and prevention measures to guidelines as a framework to provide a formalized and control such risks to be within the risk appetite. Each function structured approach in managing strategic risk. In addition to must specify key risk indicators (KRIs) for certain important having a strategic risk assessment and monitoring process, risks that require monitoring to ensure that risks are within the Bank manages strategic risk throughout the strategy the risk appetite and managed in a timely fashion. In the planning process with consists of: 1) Strategy formulation, case of losses, the Bank not only has a process to rectify the 2) Strategy alignment and change management, 3) issues systematically, but also capitalizes on lessons learned Implementation and monitoring, and 4) Performance by collecting the information to guide future prevention and evaluation and recommendations. This process ensures that mitigation plans.

001-079 (4C) NEW_M5.indd 74 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

The Bank’s risk assessment and control process undergoes Application of the reputational risk management guideline periodic reviews to identify new emerging risks and detect depends on the nature of the business in terms of ineffective controls that worsen existing risks. The results reputational risk exposure. Financial companies exposed to are reported to relevant committees and senior management high reputational risk must implement the reputation risk for approval and to determine action plans to reduce or management policy with a clear reputational risk management eliminate such risks. process, whereas companies with non-material reputational risks are required to report any reputational risk incidents To ensure that the business can continue in critical to senior management. situations, the Bank revised the Crisis Management Plan as well as consistently improving its crisis management and Any transactions which may negatively affect the Bank’s business continuity capabilities throughout 2017. reputation require prior approval by the Executive Committee and may be reported to the Board of Directors Risk pertaining to changes in statutory policies, laws, if deemed appropriate by the Chairman of the Executive rules and regulations is part of operational risk. Committee.

Beside the operational risks already mentioned, the Bank, as a The CSR, Corporate Branding, and Communication Function financial institution, has a duty to comply with laws, statutory is responsible for working closely with other internal rules, and regulations of several regulatory agencies, such as functions and SCB Group companies to determine the Bank of Thailand, the Securities and Exchange Commission, reputational risk factors as well as assessing and reporting the Stock Exchange of Thailand, the Anti-Money Laundering reputational risk issues to the Risk Management Committee Office, and others. and the Executive Committee. 75

The Bank’s Compliance and Operational Control Function 7 People Risk is responsible to provide regulatory advice, clarifications, and recommendations to other related functions to ensure that the Bank and SCB Group comply with laws, regulations, People risk refers to risk exposure to an organization and internal rules. The Compliance Function reports any from people’s actions or negligence and, vice versa, risks to material regulatory risks to senior management and related people from an organization’s actions or negligence. committees to ensure effective regulatory risk management. As people are the most important assets of an organization, people risk can influence other risk types, i.e. credit risk, 6 Reputational risk market risk, liquidity risk, reputational risk, operational risk, and strategic risk.

Maintaining the organizational reputation is a critical SCB recognizes the importance of people risk in the part of running the business, especially for financial business and has made serious efforts to address people businesses, since the Bank’s reputation comes from the risk. The Board of Directors has set an effective framework confidence and trust that have been built up over many for people risk management as well as conducting overall risk years. Reputation is not easy to build but easy to ruin. review. Senior management oversees people risk management and control within their functions as well Recognizing the importance of reputational risk, SCB has as coordinating with the People Function and other develop a reputational risk management guideline and relevant functions. process which will be applied to the Bank and SCB Group companies. Each business is required to take necessary The People Function, together with business functions prevention measures against potential reputational risk from and relevant support functions, are responsible for both internal and external factors, whether income identifying people risks based on appropriate analysis generating or not. given the business complexity of each function, as well as assessing, controlling, monitoring, and reporting risks to the Bank’s management with periodic reviews and updates of potential risks.

001-079 (4C) NEW_M5.indd 75 12/3/61 16:25 ANNUAL REPORT 2017

The people risk management framework involves three also changed its organizational structure by separating sales major considerations: and services functions as well as putting an emphasis on 1. People capacity and capability: SCB’s business approach helping people build their career paths to ensure business is based on having adequate people capacity to perform success and sustainable growth. The Bank places importance duties as well as having people capability that are on providing a safe and conducive work environment to appropriate for job positions and responsibilities. foster employee engagement. The Bank expands the scope of people’s decision-making authority, increases their capabilities, and provides Board of directors of the Bank and SCB Group companies learning opportunities and conducive working environment have established effective people risk management to enable them to reach their full potential. frameworks with overall risk exposure review. Senior management is responsible for managing people risk 2. People conduct: SCB’s business approach is based under their areas of responsibilities and establishing on people’s integrity and risk owner, especially for effective control as well as working closely with the People risks within their areas of responsibilities, as well as internal Function and other relevant functions. collaboration to create a positive work culture. The People Function, business functions, and relevant support 3. People health and safety: SCB’s business approach is functions are responsible for identifying people risks using based on a strong commitment to creating a safe working appropriate analysis given each function’s inherent business environment for people with considerations to both physical complexity with regular updates and reviews of potential risks. and emotional health. 76 For people risk management, the Bank and SCB Group Failure to put any of the above considerations into practice also apply the “Three Lines of Defense” principle used may lead to varying degrees of people risk depending on the in operational risk management to ensure effectiveness situation. Therefore, it is critical to assess, control, and mitigate in people risk management and internal control. people risks to remain within the Bank’s risk appetite. 8 Technology risk People are vital resources in the banking business. Not only must the Bank provide suitable products and services that meet customer needs, there are also rules and regulations Today’s technology is changing rapidly. If the Bank cannot on customer protection with which the Bank and its staff adapt or come up with a long-term plan to accommodate must comply to avoid market misconduct. Therefore, the the changes, the Bank’s business may suffer and lose Bank needs people capacity and capability to help achieve market share. Specifically, the Bank may not be able to its business goals in a sustainable manner. SCB recognizes serve customers effectively in terms of meeting their the importance of human resources which have been under product or pricing needs. Moreover, technology risk may significant and constant challenges in today’s environment. also cause business and service disruptions which may A key challenge is the advent of new technologies which lead to lower profitability and market share for the Bank. may replace existing service delivery platforms and put pressure on an organization to reform or transform itself. Because of these wide-ranging and inter-related impacts, Such broad-scale organizational change raises demand on managing technology risk is the Bank’s priority. SCB has human resources both in terms of quality and quantity. adopted a world-class technology risk management Specifically, an organization requires knowledgeable, well- framework with the following key components: 1) Risk rounded, and adaptable people to drive changes in the identification; 2) Risk assessment; 3) Risk response; and organization. SCB has taken measures to mitigate such risks 4) Monitoring and reporting. Furthermore, the Bank recognizes by building a risk culture whereby risk awareness and and has taken steps to build and enhance the organization’s ownership are the norm, and risk mitigation and prevention risk culture, particularly for technology risk, by educating are the responsibilities of all staff. Moreover, the Bank set up and training people, managing knowledge platforms on SCB Academy to build additional skills and knowledge for technology risk to be accurate and up-to-date, applying its people, such as product knowledge and data analytics risk management tools that meet international standards, skills related to business analysis and planning. The Bank along with continually improving its risk management framework to be in line with global practices.

001-079 (4C) NEW_M5.indd 76 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

The technology risk management process enables the Bank highercompetition may pose a challenge in recruiting to adequately manage technology risk at both the strategic and attracting experienced candidates with specialized and operational levels. At the strategic level, the Bank aims technical skills, such as data management and data analytics. to build a modern, flexible, and secure IT architecture to To prevent shortage of talents which may disrupt the business, support omnichannel service delivery for customers, along the Bank set up SCB Academy to develop necessary with providing data management capabilities for marketing knowledge and skills in finance and banking business for staff and credit management analysis. At the operational level, as well as providing knowledge on technology. The Bank the Bank takes into consideration the IT organizational also has a talent program and a successor plan to identify structure, system procurement and development, system and prepare candidates with knowledge, capability, and accuracy and security, and critical data management, such as potential to fill vacancies for existing or newly created customer data, system capacity to support transaction positions. workloads, including service continuity in case of any emergency or critical situations, IT outsourcing system • Risks from procedural changes management, and others, which help increase its Different changes, ranging from technology, rules, and competitiveness and profitability. regulations, organizational structure, or even changes in customer needs, may create market conduct risk or execution risk that cause the Bank to lose customer trust Emerging Risks or face regulatory penalties. The Bank has, therefore, established an approval framework for new product The Bank enhances the effectiveness of its risk management launch which requires an overall impact assessment and process by requiring all functions to assess and review emerging approval from all related parties. The Bank also provides 77 risks for both short term (within 1 year) and long term training and maintains constant communication with staff (between 3-5 years) that are within their purview. Each function to prevent unprofessional conduct. is also responsible for presenting its list of emerging risks to the Management Committee for acknowledgement and External Risks sign-off. This process will enable the Bank to confront and manage risks effectively with diverse data sources while also • Risks from environmental changes creating bank-wide awareness on the importance of Risks from environmental changes, such as drought, flood, risk management. and global warming, may cause the Bank’s customers, such as those in agricultural and natural power sectors, to face In 2017, the Bank identified key emerging risks with difficulty reaching their business targets with a consequence potential long-term impacts on the Bank’s operations on their debt servicing ability. The Bank’s approach which are categorized into internal and external risks. to manage such risks is to incorporate environmental impact consideration into its credit underwriting criteria, as well as providing financial support to businesses Internal Risks that help reduce environmental impacts, specifying conditions of short-term loans, calibrating credit limits to • Risks from technological changes agricultural product prices, and requiring customers to buy Today’s rapid and drastic technological changes have insurance against losses from business disruptions or affected customer needs and expectations in terms of natural disasters. both method and speed of service delivery. The Bank, therefore, has increased the share of technology investment • Risks from technological changes under the Transformation Program to create a faster service Technological changes may cause some businesses, such delivery platform that can meet customer changing needs as publishing, automobile, oil businesses, to be replaced as well as developing a process to prevent cyber risk. by new technologies. The Bank has therefore incorporated this type of risks into all analyses of industries that are • Risks from organizational changes susceptible to being replaced which can then be used to Transitioning into full-scale digital banking and ensuring inform the Bank’s strategic planning and advise customers organizational adaptability to technological changes and in these industries to adapt to the changes.

001-079 (4C) NEW_M5.indd 77 12/3/61 16:25 ANNUAL REPORT 2017

• Risks from local and global economic volatility Thailand (BOT) has adopted this framework with minor One source of economic volatility and uncertainty are modifications to raise the standards of Thai commercial banks policies of Thailand’s major trading partners, such as to the global level. the People’s Republic of China, the United States, and European countries, which may affect Thai exports. Effective from January 1, 2016, the BOT requires Thai In addition, economic conditions in Thailand are still volatile commercial banks to hold a capital conservation buffer from political uncertainty. Fragile economic conditions may according to Basel III guidelines. This additional capital affect customers’ debt servicing abilities, especially for requirement is being phased in gradually which effectively the household sector which is the Bank’s core customers. increases the Common Equity Tier 1 capital requirement The Bank conducts stress testing to monitor the by 0.625% p.a. until reaching the 2.5% target in 2019. sensitivity of the Bank’s loan portfolio to changes in economic data as well as specifying additional indicators, Furthermore, the Bank has recently been designated by the such as share of non-performing loans and gross BOT, along with 4 other major Thai commercial banks, as domestic product, to be used in determining an Domestic Systemically Important Banks (D-SIBs). To ensure appropriate level of lending. stability and resilience of D-SIBs, the BOT requires D-SIBs to maintain additional minimum Common Equity Tier 1 capital as a capital buffer (so called Higher Loss Absorbency), starting Capital Adequacy at 0.5% in 2019 and increasing to 1.0% in 2020.

In response to the global financial crisis in 2008, the Basel The minimum regulatory capital requirements which include 78 Committee on Banking Supervision announced a new set of capital conservation buffer and D-SIBs buffer (Higher Loss regulatory guidelines, known as Basel III, for assessing capital Absorbency) are shown in the table below. adequacy and liquidity risk in December 2010. The new guidelines aim to strengthen bank capital position and set a new Banks that cannot meet this minimum requirement may be standard for liquidity risk management. The Bank of subject to earnings-distribution restrictions, e.g., dividend

Minimum regulatory capital requirement 2016 2017 2018 2019 2020

Capital Conservation Buffer 0.625% 1.25% 1.875% 2.50% 2.50%

D-SIB Buffer - - - 0.50% 1.00%

Common Equity Tier 1 5.125% 5.75% 6.375% 7.50% 8.00%

Tier 1 Capital 6.625% 7.25% 7.875% 9.00% 9.50%

Total Capital 9.125% 9.75% 10.375% 11.50% 12.00%

001-079 (4C) NEW_M5.indd 78 12/3/61 16:25 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

payouts, discretionary bonus payments, share buybacks, etc. Risks to Shareholders

Since January 1, 2013, SCB has adopted the Basel III Shareholders are subject to the risk that expected returns guidelines on a bank-only basis, as well as the guidelines on a from their investments, either in the form of dividend consolidated basis, ahead of the corresponding BOT deadline. income or capital gains, may not materialize. Dividend The Bank continues to apply the standardized approach income is directly linked to the Bank’s profits. Shareholders to assess regulatory capital adequacy for credit risk, market should expect to receive dividend income between risk in the trading book and operational risk. Also, the Bank 30-50% of the Bank’s consolidated net profit as stated in the continues to manage, monitor, and report its capital Bank’s dividend policy. Capital gains are determined solely adequacy position through the internal capital adequacy by SCB share price which is influenced by a variety of assessment process (ICAAP), which includes developing factors, such as the Bank’s performance, domestic and global estimates for future capital requirements and stress testing. economic trends, domestic political stability, and foreign The Bank sets target capital ratios in the ICAAP report to fund inflows and outflows, most of which are beyond the reflect the Bank’s capital targets vis-à-vis its overall risk Bank’s control. appetite. The Bank submits the ICAAP report to the BOT on an annual basis by the end of March. Furthermore, in order The Bank’s performance, the only factor under the Bank’s to encourage market discipline, the BOT requires control, has been in line or exceeded market expectation commercial banks to disclose key information on capital in recent years. At the beginning of each year, the Bank structure and adequacy, risk exposure as well as risk provides broad guidance on its financial targets and assessment and management, on a semi-annual basis. shareholders face the risk that these financial targets may This information appears on the Bank’s website under not be met in a particular year which would affect both 79 ‘Pillar III Disclosure’. dividend and share price. SCB mitigates this risk by having a clear business policy with appropriate short-term to At the end of December 2017, under the Basel III medium-term strategies, along with clear annual financial framework, the Bank had total capital of Baht 342 billion targets. In addition, the Bank has delivered the highest net (17.2% of risk-weighted assets), of which Baht 300 billion profit among Thai financial institutions in an environment was classified as CET1/Tier 1 capital (15.1% of risk-weighted with intense competition. Although past performance assets) and Baht 42 billion (2.1% of risk-weighted assets) does not guarantee future results, it demonstrates the Bank’s was classified as Tier 2 capital. For SCB Group, the total capital competitiveness, strategic effectiveness both in terms of stood at Baht 365 billion (17.7% of risk-weighted assets), direction and implementation, and the quality of its of which Baht 322 billion was classified as CET1/Tier 1 capital management team, which help put the Bank in a better (15.6% of risk-weighted assets), and Baht 43 billion position than industry peers to face any adverse shocks. (2.1% of risk-weighted assets) was classified as Tier 2 capital. In addition, since the proportion of shares held by the Bank’s Note that if the Bank’s 2H17 net profit is included in the two largest shareholders is quite large, shareholders face capital adequacy calculation, CET1/Tier 1 capital will be 16.0% the risk that major shareholders materially reduce their on a bank-only basis and 16.5% on a consolidated basis. position which can significantly depress share price. Nevertheless, the Bank expects the effect to be short-term, The Bank believes that its strong capital position, which is given that the Bank’s market capitalization is among one currently well above the minimum regulatory requirement, of the highest in the stock market, making the Bank’s stocks together with high loan loss provisions, will enable the Bank highly liquid with high trading volume. to withstand the impact of adverse shocks on the Bank or on the Thai economy. Moreover, its solid capital position will also enable the Bank to pursue any future growth opportunities.

001-079 (4C) NEW_M5.indd 79 12/3/61 16:25 ANNUAL REPORT 2017

CORPORATE SOCIAL REPONSIBILITY

5.1 SCB SUSTAINABILITY REPORT 5.2 CORPORATE SOCIAL RESPONSIBILITY COMMITTEE REPORT

080-160 (4C) NEW_M5.indd 80 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

CORPORATE SOCIAL REPONSIBILITY

5.1 SCB SUSTAINABILITY REPORT 5.2 CORPORATE SOCIAL RESPONSIBILITY COMMITTEE REPORT

080-160 (4C) NEW_M5.indd 81 12/3/61 16:28 ANNUAL REPORT 2017

5.1 SCB SUSTAINABILITY REPORT

Driven to become ‘The Most Admired Bank, SCB is committed by implementing a top-down approach from executives to 01 02 03 04 to 05conducting business under the06 good governance practices, 07employees to build an organisational08 culture that is agile08 and recognising that ethical business conduct with social and strive even during change. environmental responsibility are essential for sustainable growth. SCB, therefore, operates its business under good The Bank conducts business by upholding good governance governance principles and transparency with considerations principles with transparency as well as complying with regulatory upon social and environmental impacts, ensuring balance and guidelines for financial services both on market conduct and the fairness for 5 major stakeholders: customers, employees, government policy to promote a cashless society. Moreover, to society, shareholders and regulators. create sustainable growth and profits for shareholders, the Bank places an emphasis on long-term stability and thus develops a For customers, the Bank’s business strategy prioritises risk mindset for the overall organisation to be ready for changes. understanding customer needs and building engagement by offering products and services that meet their needs and For social responsibility, the Bank has refocused its community deliver good experiences. The Bank strives to facilitate and social development strategy to providing public education consumer lifestyles and enhance their quality of life by to people of all age group on saving, financial literacy and providing financial advice and new business opportunity discipline through the Bank’s service and communication recommendations with the goal of creating the highest channels. The Bank also develops more diverse and customer satisfaction and becoming the main bank. convenient channels to access financial services (Financial Inclusion), as well as organising activities for social and SCB continues fine-tuning its human resource management educational development to raise the quality of life for people 82 strategy to achieve the goal of being a company that creates in the society and promote sustainable growth. value, promotes career advancement, and treats employees equally. Moreover, the Bank fosters a culture that emphasises Please refer to SCB Sustainability Report for more details. agility for rapid decision making and courage for experimentation

SCB Sustainability Approach To be the Most Admired Bank is also Our Way of SUSTAINABILITY

• Customers • • Employees • • Shareholders • • Society and • Regulators • To be the Most To be the Most To be the Most environment • To be the Most Preferred Partner Caring Employer Sustainable Return To be the Most Prudent bank Company Responsible Corporate Citizen

080-160 (4C) NEW_M5.indd 82 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

5.2 CORPORATE SOCIAL RESPONSIBILITY COMMITTEE REPORT

Siam Commercial Bank conducts business with the 1. Set the policy and implementation framework, as well 01 02 03 04 belief05 that “Business cannot06 thrive on weak social 07 as monitoring and analyzing08 performance of the08 Bank’s foundations.” Throughout its existence, the Bank considers and the Siam Commercial Foundation’s CSR activities caring for the society its duty and responsibility to make 2. Allocate resources and budgets for projects and activities the society strong and ready to grow together which is of both the Bank and the Siam Commercial Foundation an important foundation for sustainable development. In 2017, the CSR Committee held 8 meetings with the The Bank’s approach on sustainable development is based key agenda on improving quality of life, youth development, on the Philosophy of Sufficiency Economy which focuses and sustainable community development, covering the on striking a balance between the economic, social, following initiatives: environmental, and cultural dimensions. The main goal is to lay “critical” foundations for a strong society and 1. Funding mobile breast cancer screening unit sustainable growth of the business by focusing on developing “people” which are the key engine that drives 2. Collaborating with the Cholangiocarcinoma Screening all developmental efforts. This includes the general and Care Program population who, if provided with good quality of life, high-quality education, good career opportunities to 3. Water system development project in Thoet Thai facilitate financial independence, good health and well-being, sub-district, Mae Fah Luang district, Chiang Rai province with a and good environment, will be an important force for the 3-year duration country’s progress, as well as the Bank’s people who, if 83 deeply cultivated with the value and culture of generosity, 4. Promoting social enterprises for sustainable development sharing and self-sacrifice with social responsibility and volunteer spirit, will be the major force for continuing the 5. Internal campaign to reduce use of plastic bottles (To Care Bank’s legacy to create benefits for the society in a sustainable is To Quit Project) manner now and in the future. 6. Leadership Program for Sustainable Education To demonstrate its commitment, determination, and (CONNEXT ED) prioritization on this cause, the Bank established the Siam Commercial Foundation in 1995 and appointed the 7. Strengthening youth development organizations at the “Corporate Social Responsibility (CSR) Committee” in provincial level 2006 to oversee this specific area. The Committee consists of 5 directors whose duties and responsibilities, as set 8. Local community youth development in 4 regions forth in the CSR Committee Charter and the Corporate phase 3 (2017-2019) Governance Policy, are as follows: 9. Teacher empowerment program

080-160 (4C) NEW_M5.indd 83 12/3/61 16:28 ANNUAL REPORT 2017

CSR activities of the Bank and the Siam Commercial Prevention: Organize the “Eat Cooked Food to Stop Cancer” Foundation are targeted at the three main areas in campaign to provide knowledge and preventative approach conjunction with promoting volunteer spirit by engaging for this illness with the goal of changing people’s behavior the Bank’s people in the CSR activities. Screening: Donate 5 ultrasound machines for screening people in the high-risk group along with a van and a 1. Quality of Life and Community pick-up truck for the screening unit Development Category Treatment: Support the Cholangiocarcinoma Foundation, Khon Kaen University, on the “Promote Access to Good Life Starts with Good Health Cholangiocarcinoma Surgery” project in remembrance of His Majesty King Bhumibol Adulyadej and in honor of Her Because “people” are the key engine for national Majesty Queen Sirikit (Rama IX) on the occasion of Her 84th development, sick and unhealthy people will not be able to birthday. The Bank donated Baht 8 million to cover surgery support themselves and pose an obstacle to the country’s costs for poor patients diagnosed with cholangiocarcinoma developmental progress in every dimension. SCB, therefore, in addition to purchasing medical equipment and vehicles. promotes and supports people to stay healthy, strong, and The Bank also helped raise additional funding from public away from sickness. donations through various channels of the Bank, such as ATMs and SCB Easy App. Collaboration with the Cholangiocarcinoma Screening 84 and Care Program Funding Mobile Breast Cancer Screening Unit

Every year, the death toll from cholangiocarcinoma reaches Breast cancer is another major health issue that is the No.1 20,000 people a year, most of whom live in the Northeastern leading cause of deaths for Thai women. Her majesty Queen region and are male household breadwinners whose Sirikit cares about the health of her subjects and personally sickness or death causes family disruption with social and donated Baht 2 million as seed capital to build a breast cancer economic consequences. Currently, there are as many as 6 diagnosis and treatment center, named “Queen Sirikit Centre million people in this region who have high risk of developing for Breast Cancer,” and has accepted the “Queen Sirikit Centre cholangiocarcinoma mainly due to lack of knowledge and for Breast Cancer Foundation” under Her royal patronage. understanding coupled with unhealthy custom of consuming raw fish, especially minnows in the Cyprinidae family. To continue Her legacy and honor Her Majesty Queen Sirikit The problem is compounded by limited access to medical (Rama IX) on the occasion of her 84th birthday, SCB has services which delays treatment as well as lack of financial provided financial support for the Mobile Breast Cancer resources to pay for treatment, causing the number of Screening Initiative by the Queen Sirikit Centre for Breast inflicted people to skyrocket to the point of becoming Cancer and the Thai Red Cross in the amount of Baht a major public health issue in the national agenda. 35 million. With an expected completion date in mid-2018, the mobile unit features highly efficient 3D SCB, therefore, provides support to the Cholangiocarcinoma mammography with imaging equipment for biopsy as Screening and Care Program or CASCAP by the well as facility for breast ultrasound and diagnosis. Faculty of Medicine, Khon Kaen University, to help solve this health problem throughout the entire process from: This mobile breast cancer screening unit will give the needed medical access to people in remote areas or those with transportation difficulty and lower the risk of life-threatening cancer with early diagnosis and treatment.

080-160 (4C) NEW_M5.indd 84 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

SCB Blood Drive Building Strong Communities and Foundations for Sustainable Development The number of patients requiring blood transfusion is rising each year against limited blood supply which has not kept 3-Year Water System Development Project at Thoet Thai up with demand. SCB has collaborated with the Thai Red Sub-district, Mae Fah Luang District, Chiang Rai Province Cross National Blood Center to organize blood drives since 1996 by leveraging the strength of its branch network No other problem can corrode the well-being of rural residents to set up blood drive locations for people who are interested more than water shortage since most are farmers whose in blood donation but have travel or time constraints. livelihood depends on water for agriculture. For these people, water shortage means difficulty to make ends meet which is the In 2017, the Bank organized the “SCB Blood Drive 2017” root cause of other problems, such as deforestation, slash-and- campaign to raise public awareness on the importance of burn farming, or migration to “chance it” in big cities, setting off donating blood regularly under the “Do Good by Donating a whole chain of problems, including crime and slums. Blood in Remembrance of His Majesty’s Compassion” to honor His Majesty King Bhumibol Adulyadej by ensuring SCB recognizes the importance of “water” and, therefore, sufficient blood supply for all patients throughout the country. has applied His Majesty King Bhumibol Adulyadej’s initiatives The Bank has organized the total of 32 blood drives and on water management to set up water management have able to obtain and deliver as much as 60.48 million cc committees for forest conservation and restoration in of blood to the Thai Red Cross National Blood Center conjunction with efficient and sustainable water management from 151,201 donors which helped save 453,603 lives. for agriculture. The Bank collaborates with local communities, Mae Fah Luang Foundation under the Royal Patronage, and 85 Even more impressive is that for 20 years since the beginning related organizations and networks to build 64 dikes for of the blood drive initiative, there have been 950,000 donors agricultural use and 4,300 dikes for conservation purposes in giving more than 380 million cc of blood for the Red Cross to Thoet Thai sub-district, Mae Fah Luang district, Chiang Rai save more than 2.85 million lives. province. This project has provided benefits for areas from upstream to downstream: Upstream – preserve The ongoing blood drive campaign will be one of the Bank’s 193,531 rai of forest; Mid-Stream – provide sufficient water legacies that help save fellow human lives and keep them for year-round consumption and for multiple cropping healthy so that they can contribute to driving the country’s to farmers in 15 villages, 1,049 households, and 4,671 rai of development. agricultural areas; Downstream – 174,442 rai of basin capacity facilitates water management planning and consistent water supply.

080-160 (4C) NEW_M5.indd 85 12/3/61 16:28 ANNUAL REPORT 2017

The strength of this project comes from adopting His Majesty’s higher yield, better product quality, and predictable initiatives on water management and sustainable community market demand which will increase competitiveness. The development based on the “Understand, Access, and government agencies, the public sector, the private sector, Develop” principle of King Bhumibol Adulyadej. The project and four foundations (Pidthong Foundation, Mae Fah Luang is operated by putting people at the center of development Foundation, Thai Sustainable Development Foundation, using the “Volunteer” model. Specifically, people who will Rakkaew Foundation) who participate in this program derive benefits from the project will be the ones who build assume the role of “mentors” with each organization and maintain dikes and piping systems with assistance from contributing unique experience, knowledge, management the Subdistrict Administrative Organizations to oversee the techniques, and technology and offering advice to ensure construction and Mae Fah Luang Foundation to provide that the project achieve concrete and sustainable outcomes. materials and equipment along with technical knowledge on water system development as well as monitoring and assessing project performance. 2. Youth Development and Learning Enhancement Category This model of development which engages local residents not only provides hands-on knowledge to the people involved, Promote Education, Develop Youths, but also creates a sense of ownership and promotes strong Create High-quality Citizens community cohesion which contribute to the project’s success and enable the project to operate smoothly, Education is an important mechanism for developing people. continuously, and sustainably. However, Thai educational system so far has focused 86 exclusively on academic excellence. SCB and Siam Commercial In addition, the Bank also engages employees in this project Foundation, which was founded by the Bank with a youth to deepen their appreciation for forests, water sources, and development mandate, have worked together to promote, community development through hands-on experiences drive, and create a high-standard educational mechanism of building dikes and teaching financial literacy to people in that lays a foundation for sustainability. The goal is to the communities to address the problem of high household create an education system that focuses on students’ life-long debt burden. learning, curiosity, life skills and social skills, as well as being kind, conscientious, and good citizens of the society with Promoting Social Enterprises for Sustainable learning that happens both inside and beyond the classroom. Development To achieve this goal, students, teachers, schools, and every related organization must work together to create an SCB recognizes that if “people” and “community” can atmosphere and environment conducive to learning within manage, monitor, and solve problems by themselves, the school and the classroom and persuade and enable change from being “takers” to “drivers” of development, teachers to switch from the current teaching method of and become self-sustainable, they will serve as strong telling knowledge to sharpening skills and character. The foundations for the country’s economic, social, and new approach to education should also stimulate students environmental development. The Bank, therefore, supports to learn by doing and train their analytical thinking by the project to promote social enterprises for sustainable organizing enrichment activities with assistance from related development under the idea of consolidated farming which organizations, both from the public, private, and civil society, encourages farmers to form a group to produce the same to advice, promote, support, share, and learn together. products which facilitates joint planning, knowledge transfer, idea sharing, raw material procurement, and marketing. The cooperative effort will lead to lower costs,

080-160 (4C) NEW_M5.indd 86 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

SCB Challenge 3. Community Project Competition for Undergraduates

“SCB Challenge” was born from SCB’s commitment to helping SCB organizes this activity to provide an opportunity for children and youth reach their full potential to become valuable undergraduate students to use their knowledge and resources and the key engine for future national development. experience to create projects that benefit their communities Started in 2005, this initiative provides a “Stage of Opportunity” in either economic, social, quality of life, or environmental for young people at all education levels to demonstrate dimension. Beside the direct benefits for the communities, their talents, learn new skills and knowledge, and exercise students get a chance to practice their analytical, management, their creativity by participating in a competition that is team work skills to prepare for stepping into the working age appropriate. world and becoming valuable resources for their organizations in the future. 1. Painting Competition for Grade 1-6 Students The benefits of participating in the“SCB Challenge” go beyond Art not only fosters imagination and creativity, but also fame or awards. Participants are given the “opportunity” to helps promote sensory development and dexterity as well demonstrate knowledge, ability, and imagination with creativity as emotional and mental development to be positive and as well as gaining “invaluable experiences” from working optimistic. To instill the love of art and further encourage with others, learning the meaning of “team”, and making children with artistic abilities, SCB organizes a painting new friends. Most importantly, this activity gives participants competition to give children an opportunity to show their an “inspiration” to serve their society and country imagination and creativity through their works of art which when they become adults. 87 will be useful for building skills and knowledge at a higher level. Leadership Program for Sustainable Education 2. E-Magazine Competition for Secondary School (CONNEXT ED) Students In 2016, SCB joined a network of 12 private organizations In the era of globalization, rapidly changing global trends may in the CONNEXT ED project to drive Thailand’s basic cause local art and culture and Thai traditions to be ignored or educational system to a new dimension in a joint effort overlooked with little chance of being passed on to the next with the government and the civil society. The goal is to generation. To encourage young generations to learn about drive change in the Thai educational system to reach a and take pride in their communities, the Bank organizes the higher standard which has, thus far, been underway at E-magazine competition as a venue for telling stories about 3,342 schools with a plan to extend the implementation to their local communities, provinces, or country related to 7,424 schools covering all subdistricts nationwide by 2018. the royal institution, traditions, and Thai art and culture. This activity gives an opportunity for participants not only to An important activity required for this program is to select become familiar with and take pride in their local communities, 30 “School Partners” or employee representatives who but also to learn and apply new innovations in media possess qualifications for being the next generation leaders technology creatively. The Bank’s goal is to help youths and strong commitment to public service to support, build life skills and keep up with global changes so that assist, and collaborate with the team of school management they are equipped with skills of the 21st century ranging and teaching staff on school development. This collaboration from life skills, learning skills, to IT skills. facilitates mutual learning and in-depth understanding of

080-160 (4C) NEW_M5.indd 87 12/3/61 16:28 ANNUAL REPORT 2017

the problems of Thai education. The team’s important task The goal of the Institute is to become a leading research is to create a development plan that is actionable and university in science and technology at the national level practical with the key objective of enabling teachers to by 2020 before being in the top 10 ranking of ASEAN adopt teaching approaches that foster students’ thirst for research universities by 2025 and eventually one of the knowledge, build life skills, and facilitate integrative learning top 50 research universities at the global level by 2035. which are necessary qualifications for learning in thest 21 century. The Bank targets to develop 50 schools with 931 In addition to providing Baht 450 million funding to build teachers and 13,058 students located in 29 provinces across the School of Information Science and Technology, the Bank the country for which the Bank’s executives and education also plays an important role in shaping the research agenda experts provide advice and guidance as well as close and providing internship opportunities for the Institute’s monitoring and performance evaluation throughout the project. students to gain working experiences as well as offering undergraduate scholarships for students who want to pursue The Bank believes that the CONNEXT ED program education at VISTEC. Moreover, the Bank also invites experts will enable teachers and students to have effective from the Institute to provide knowledge for the Bank’s lessons and learn together. In addition, this approach executives and employees. also serves as a mechanism to instill positive attitudes and create unlimited learning potential for children. Idea Nursery Program

Support for Vidyasirimedhi Institute of Science and Every year, there are many projects submitted to the Technology Thailand ICT Contest Festival that are great “original ideas” 88 but lack the “opportunity” for further development and SCB promotes and supports the national development effort commercialization because they do not address users’ at every level, from laying a strong foundation to making needs. SCB collaborates with Siam Commercial Foundation further advances in the development, by helping to set up and National Electronics and Computer Technology Center the School of Information Science and Technology which (NECTEC) to assemble a team of experts from a wide is one of the five schools of Vidyasirimedhi Institute range of fields to give advice on product designs that of Science and Technology or VISTEC. address consumer needs as well as providing professional knowledge on management, marketing, and product Vidyasirimedhi Institute of Science and Technology or presentation. The Bank also provides funding to bring these VISTEC was founded by PTT Group from a conviction young people’s creations to the hands of users, a process that that it was time for Thailand to have a world-class university lays a foundation for future inventors and next generation specialized in science and technology to produce entrepreneurs. cutting-edge knowledge, achieve innovation excellence, and create top researchers to help develop and make The Bank has funded this project for five consecutive years. Thailand ready to compete in the global arena. In 2017, there were 57 participants from 13 educational institutions, 8 of which were schools and 5 were universities. VISTEC, situated on a 680-rai campus in Wangchan The Bank provided further funding for 15 projects, 9 of district, Rayong province, opened in 2015 offering master’s which have developed into useful products real applications. and PhD programs in Energy Science & Engineering and Of these 9 projects, 8 of them have obtained patents while Molecular Science & Engineering with an addition of the the remaining project is in the process of patent registration. Information Science and Technology Department in 2017.

080-160 (4C) NEW_M5.indd 88 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Teacher Empowerment Program Strengthening Youth Development Organizations at the Provincial Level The Bank believes that Thai educational system must change from “Telling knowledge” to “Teaching learning” so that Children and youth development requires a mechanism learners have the skills necessary for the 21st century with to ensure consistency and sustainability. This can be achieved high moral characters and will grow up to be good citizens. by galvanizing support from government agencies, youth Such change can only happen in the classrooms and the development organizations, local administrative organizations, people who are vital to instigate this change are the and all sectors of the community, be it families, temples, “teachers.” SCB and Siam Commercial Foundation join a schools, heath stations, etc., to take collective and persistent coalition of 23 organizations to drive educational reform as actions to tackle the problems related to children and youths well as teacher and school development to ensure that in local communities. Collaborative efforts can be in the form students have knowledge and skills necessary for the 21st of initiatives that encourage children to build and practice century. skills for the thinking process to improve themselves, their families, and their communities through hands-on activities The Bank is convinced that every teacher has his or her that allow children to brainstorm, work in teams, make joint own teaching techniques, approaches, tools, and skills to decisions, share responsibilities, and learn on their own. This educate students to be knowledgeable, capable, and process helps children acquire leadership skills, appreciate ethical but faces certain limitations to reach full potential. the value of their local communities, deepen their The Teacher Empowerment Program, therefore, has volunteer spirit, and use their capabilities and knowledge been launched to help develop teachers and drive to drive local development with guidance and support from educational reform by setting up the “learning space” adults. 89 as a centralized venue for teachers from different networks to share ideas and learn together. By building SCB, therefore, supports, develops, and strengthens youth skills for teachers, the learning space serves as a development organizations in 4 provinces, which are Nan, “professional learning community” for teachers to Sisaket, Songkhla, and Samut Songkhram, to lead the youth acquire skills of “trainers” in the 21st century for learners’ development effort to ensure that young people in these development. piloted provinces grow up to be good citizens. To have concrete and clear performance indicators, the Bank The Teacher Empowerment Program has been considered a extended this effort into a research project to monitor success not only because of the manifested changes among changes in children to assess the effect of community projects the teachers, but the program also makes teachers realize on brain development among young people, especially on their values, motivated to work, eager to teach, and able the brain region related to executive function, as well as to plan lessons effectively and creatively. All these changes the effect on skills and capabilities of project participants. in teachers have shown clear benefits for students, such Moreover, the Bank also conducts a research project on as improving academic performance among weak “innovations in CSR projects and coaching to foster civic students, transforming bullies into leaders, turning socially responsibility among youths and increase organizational withdrawn and isolated children to cheerful students who capabilities.” This research project studies innovations in can get along with friends, and making rambunctious children community projects to instill the sense of civic obligations enjoy being involved in public and community services. in young people as well as the effectiveness of coaching in

080-160 (4C) NEW_M5.indd 89 12/3/61 16:28 ANNUAL REPORT 2017

developing youth capabilities and awareness. The project launch TOO FAST TO SLEEP.SCB by renovating a 500 sqm also studies alternative approaches for improving, building on, area on the 2nd floor level of SCB’s Siam Square branch to developing, and applying the knowledge to the education be a meeting point for young generations. This area is open system and create a mechanism for long-term youth for students and general public to use for reading, meeting, development. or co-working space 24 hours a day with no charge by downloading SCB Easy app to gain instant access. Since its inception, the Bank found that this initiative can Moreover, the Bank also designates this area as a cashless effectively build 21st century skills for young people and instill zone -- any food and drink purchased in this zone can only the sense of civic duty. Inspired by this success, the Bank be paid with PromptPay transfers, credit cards, or debit cards expanded the area of operations in 2017 to Lamphun province with no cash allowed. This initiative aims to make the (Upper Northern region) and Satun province (South public ready for an imminent transition into a cashless society. Western Region) with a plan for further expansion to other provinces in the future.

Local Community Youth Development in 4 3. Promoting Volunteer Spirit among Regions Phase 3 (2017-2019) Employees Category

SCB took part in building skills for officers in Local Foster a Volunteer Culture to Continue Administrative Organization which are necessary for the Bank’s CSR Legacy solving youth problems and advancing youth development. 90 The Bank found that the Subdistrict Administrative Fulfilling social responsibility cannot be sustained without Organizations (SAOs) can provide concrete solutions for the “successors” who must have “volunteer spirit” and problems common to children in high-risk group, such as “awareness” to recognize their social obligation. These gang fighting and school dropouts, and create jobs for people should not be motivated by superficial reasons, youths outside the formal education system as well as being such as trend following or creating positive self-image, but the main engine for promoting youth learning in their should have genuine appreciation of the benefits and values areas. Based on this evidence, the Bank and Siam of volunteering. SCB, therefore, focuses on instilling value Commercial Foundation, together with the Thailand Research and culture of sharing, volunteer spirit, working for the Fund (TRF), supports the SAOs in their research effort to greater good, and deepening awareness of social responsibility. strengthen the organizations with the skills of data-driven The best method, which has been tried and true, is to decision making and planning to improve the efficiency in provide opportunities for employees to gain direct youth development efforts. Currently, there are 6 SAOs experiences from participating in the Bank’s CSR conducting and receiving funding for research with the activities. Employees can get involved in all aspects of the goal of developing capabilities of Local Administrative process from brainstorming, joint decision making, joint Organization officers to have skills necessary for youth planning, to execution under the “SCB Let’s Do Good” development work and build SAO networks within campaign which focuses on 3 key domains: youth their areas. development, community development, and environmental conservation. In 2017, there were 61 SCB Let’s Do Good Too Fast To Sleep.SCB projects operated in 25 provinces with 9,528 volunteered employees. SCB is committed to becoming a leader in lifestyle banking and the Most Admired Bank by creating new products 1) Youth Development - focuses on promoting youth and services to meet customer needs in the digital age. learning and development with 26 projects, such as SCB Last year, the Bank partnered with Too Fast To Sleep to Let’s Do Good : SCB with 3 Values which teaches children

080-160 (4C) NEW_M5.indd 90 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

the value of money and saving through storytelling and At first glance, reducing the use of plastic bottles may seem games, making learning fun and easy to understand for trivial. However, a closer look will reveal that this is a change children, as well as improving school health facilities and in behavior to overcome habits and temptation of organizing ongoing learning activities. convenience (from using plastic bottles) which requires patience, persistence, and sacrifice to form a new habit. If SCB Let’s Do Good: Field Trip Chaperone opens up the successful, this effort will serve as a good starting point that world of education beyond the classroom for poor children can be extended to other areas to cut down or quit. to gain new experiences and learn life lessons with field trips to visit many tourist sites. Participation in these activities not only generates social benefits, but also provides an opportunity for employees Thus far, these activities have been carried out at 23 schools to bond with their coworkers and create efficient work and 3 foundations with 4,048 children and 3,330 employee habits by implicitly training employees on time management, volunteers participating in the activities. sacrifice, responsibility, teamwork, and leadership. Participants also gain new experiences that can be applied to improve 2) Community Development – Performing community their work. Most importantly, these activities instill social service with the total of 16 projects, such as volunteer responsibility awareness and volunteer spirit within activities for social and community service, e.g. cleaning employees who are the main engine to drive the Bank’s the public area and cremation ceremony of body donors for CSR initiatives forward in a sustainable manner. medical education. Conclusion 91 SCB Let’s Share: organizes donations of unwanted items in For future CSR activities, SCB continues to focus on youth good conditions to raise money for three Border Patrol development and building strong communities in parallel Police Schools to develop local schools and communities. with fostering a volunteer culture and social responsibility There were 1,693 employee volunteers participating in this awareness among employees. Moreover, the Bank also activity. continues to look for business partners and social networks who share the same passion and ideology for CSR 3) Environmental Conservation – Build employee awareness activities with complementarity in knowledge, abilities, for environmental conservation and development with 19 experiences, and strengths. This partnership will create more projects, such as opportunities, raise potential, and enhance efficiency of the Bank’s CSR implementation and enable the Bank to Beach Cleaning Project at 12 beaches in coastline areas create extensive and sustainable benefits for the society for throughout the country with local employees joining the many years to come. campaign to clean up beaches and restore beautiful sceneries, leaving a good impression with local people and tourists.

To Care is to Quit Project is a campaign to create awareness for the Bank’s staff to take care of the environment which can be done easily in day-to-day activities by changing behavior to reduce or stop using plastic bottles and switch to personal cups. Within 4 months of the campaign, the number of plastic bottles at the head office was reduced from 18,000 bottles a month to only 3,780 bottles, a 79% decrease. This success provides a role model to be emulated by the Bank’s branch network and business network and lessons (Khunying Jada Wattanasiritham) to be applied to other campaigns, such as reducing paper usage. Chairperson of the CSR Committee

080-160 (4C) NEW_M5.indd 91 12/3/61 16:28 ANNUAL REPORT 2017

CORPORATE GOVERNANCE

6.1 CORPORATE GOVERNANCE REPORT 2017 6.2 INTERNAL CONTROL AND RISK MANAGEMENT 6.3 RELATED PARTY TRANSACTIONS 6.4 THE NOMINATION, COMPENSATION, AND CORPORATE GOVERNANCE COMMITTEE REPORT 6.5 THE EXECUTIVE COMMITTEE REPORT

080-160 (4C) NEW_M5.indd 92 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

CORPORATE GOVERNANCE

080-160 (4C) NEW_M5.indd 93 12/3/61 16:28 ANNUAL REPORT 2017

6.1 CORPORATE GOVERNANCE REPORTREPORT 2017 2017

01 02 03 04 05 The06 Board of Directors recognizes07 the critical importance 08In 2017, the Board decided08 that the Corporate Governance of corporate governance (CG). The Bank thus adopts Code for listed companies or the CG Code which was developed effective business governance that is transparent and fair to by the Securities and Exchange Commission should be adopted all stakeholders and helps strengthen the Bank’s credibility as appropriate to the Bank’s business context and the adoption and competitiveness as an ethical and socially responsible of the CG Code should be reviewed at least annually. Such corporate citizen to achieve sustainable growth both for the decision was officially recorded as a resolution of the Board. Bank and the society at large. Such firm commitment to good governance also bolsters the trust of all stakeholders, including shareholders, customers, employees, partners, and the community. The Board believes that good corporate governance Corporate Governance Policy will help nurture the steady growth of our capital market and increase value for shareholders over the long term. This The Board has assigned the Nomination, Compensation and belief has, therefore, led the Bank to adopt good corporate Corporate Governance (NCCG) Committee to formulate governance principles and practices that are generally the Corporate Governance Policy and monitor compliance. accepted in Thailand and internationally as well as improving The NCCG Committee also reviews and revises the policy its internal corporate governance standards on a continual basis to ensure that it is appropriate and in line with regulatory as reflected in the corporate governance excellence awards guidelines pertaining to the Bank which is a commercial bank that the Bank has earned from several organizations including: and a listed company with an aspiration to achieve world-class 94 corporate governance standards. The Bank’s Corporate Governance Policy encompasses the following core elements:

1 SCB achieved the The policy elaborates the vision, mission, core values and codes top level of conduct applicable to the Bank, its directors, and employees “EXCELENT” of the Bank. In late 2016, the Board approved the Bank’s 2020 vision to be “The Most Admired Bank” for its constituents. In other words, the Bank aspires to be recognized as the most rating in the 2017 CG assessment announced by the Thai preferred partner by its customers, the most caring employer Institute of Directors Association (IOD), marking our by its employees, the most sustainable return company by 13th consecutive year for this recognition since 2005. its shareholders, the most responsible corporate citizen by the society and the most prudent bank by the regulators.

In 2017, SCB was in the top tier in the Thai Investors Association’s assessment the 2 of shareholder meetings, The policy formalizes, among other matters, corporate continuing its record of governance structure of the Bank; roles and responsibilities outstanding score 9 of the Board; tenure of members of the Board and Board consecutive committees; the Board’s meeting procedures; nomination 99-100 year since 2009 and appointment of members of the Board; an onboarding program for new directors; holding of positions in other companies by the directors and senior executives; separation

080-160 (4C) NEW_M5.indd 94 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

of position and roles between the chairman of the Board The Corporate Governance Policy is publicly disclosed and and the chairman of the Executive Committee; remuneration available on the Bank’s website (www.scb.co.th) under the of directors and persons with management authority; sequence of menu headings -- “About SCB,” “Corporate assessment of performance of the Board, Board committees, Governance,” and then “Corporate Governance Policy.” and persons with management authority; succession planning; The policy has also been announced to directors, executives, and roles and functions of the company secretary. and employees of the Bank for their acknowledgment and compliance as the Bank intends to promote its members’ understanding, awareness, regard, and internalization of the Corporate Governance Policy which will become their 3 work habit and eventually the corporate culture. The policy enumerates the rights and treatment of all stakeholders in terms of arrangement of shareholder meetings, dividend payments, information disclosure, and transparency.

The policy defines the Bank’s internal controls encompassing 95 the rules and restriction governing the use of confidential and non-public information by directors and employees, connected transactions, conflicts of interest, and conflict-of- interest reporting of directors and persons with management authority.

SCB vision is to become

“the Most Admired Bank” and strives to attain such vision by 2020.

080-160 (4C) NEW_M5.indd 95 12/3/61 16:28 ANNUAL REPORT 2017

2017 Corporate Governance The Bank’s corporate governance practices in 2017 1 are summarized as follows: To ensure that shareholders receive clear and adequate 1. Rights of Shareholders information, have sufficient time to consider agenda items of the AGM, and are able to easily access the Notice of the AGM The Bank has complied with its Corporate Governance Policy and its accompanying documents, the Bank posted the Notice with the aim of ensuring that shareholders enjoy their rights of the AGM, accompanying documents, and proxy forms in and exercise such rights in an equitable manner, such as buying both Thai and English on its website 30 days prior to the meeting or selling shares, receiving dividends, and receiving adequate, date. Then, the Notice of the AGM, in both Thai and English, timely and complete information about the Bank through easily together with the 2016 Annual Report (in CD-ROM format) accessible channels. In addition, shareholders are entitled to were sent by post to shareholders at least 21 days in advance take part in material business decisions, e.g. payment of of the meeting date. The Notice of the AGM contained dividends, appointment and removal of directors, determination information such as date, time, and venue of the meeting (with of directors’ remuneration, appointment of auditors, a map and directions), and details of each agenda item (including determination of audit fees, amendment to provisions in the factual background, purposes, rationale, and opinions or Memorandum and Articles of Association, and approval of recommendations of the Board) as well as accompanying special transactions (e.g. capital increase or reduction, documents, including details of meeting procedures, acquisition, or disposal of significant assets, or connected voting and proxy appointments. The Bank also advertised transactions). The shareholders may cast their votes on these the Notice of the AGM in Thai newspapers for three matters according to details provided in the Notice of an Annual consecutive days and took other relevant actions as 96 General Meeting of Shareholders or, if applicable, the Notice of required by law. Upon request, shareholders were entitled an Extraordinary General Meeting of Shareholders. The Bank to receive printed copies of the 2016 Annual Report is determined to encourage all shareholders to exercise their before the date of the meeting from the company secretary. rights to the fullest extent permissible by laws and shall not violate or derogate the rights of shareholders by any means. The principles adopted by the Bank with respect to the treatment of 2 shareholders are shown in details on the Bank’s website (www. scb.co.th) under the sequence of menu headings --“About SCB,” The Bank recognizes shareholders’ rights to know and “Corporate Governance,” “Corporate Governance Policy,” gain full access to information and allows shareholders to and then “Section 3 - Rights and Treatment of Stakeholders.” submit questions in advance of the AGM to the company secretary through various channels, including via post or 1.1 Shareholder Meeting e-mail to [email protected], in accordance with the guidelines on the Bank’s website. Questions are In 2017, the Annual General Meeting of Shareholders (AGM) compiled and proposed to the Board by the Nomination, No. 194 was arranged on April 11, 2017 and no Extraordinary Compensation and Corporate Governance Committee. General Meeting of Shareholders was held that year. The proceedings were conducted by the Bank in a manner that ensured shareholders’ ability to exercise their rights in 3 accordance with laws, applicable regulations, and good governance practices. To encourage and facilitate participation of all shareholders (individuals, juristic persons, and institutional investors) in the AGM and exercise their rights in an equitable manner, the Bank delivered the Proxy Form B to shareholders for the appointment of proxies to attend the meeting on their behalf in the event that they were unable to attend the AGM in person. Furthermore, institutional investors, such as fund managers or custodians,

080-160 (4C) NEW_M5.indd 96 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

were invited to nominate their representatives to attend the tabulating and reporting votes. Representatives from Baker & meeting and, for their convenience, the Bank assigned officers McKenzie, an independent law firm, were engaged to review to check the required documents in advance of the meeting. and inspect the validity of the proxy appointments, adequacy of quorum, and tabulation and reporting of votes. Therefore, the voting results for each agenda item were reported to 4 the meeting in a timely, accurate, and transparent manner. To facilitate attendance by all shareholders and proxy holders, the AGM was held during business hours and on a working 6 day at the Bank’s head office. On the meeting day, registration counters were open at least two hours prior to the meeting Multimedia presentations were used at the meeting to show time to facilitate procedural document checks and registration. the 2016 performance highlights and a brief summary of the For efficiency and convenience, the Bank made available 2017 business strategies. The chairman of the meeting allowed revenue stamps to be affixed to the proxy forms presented shareholders to ask questions and/or make recommendations by proxies attending the meeting. Separater egistration on an equitable basis and provided comprehensive responses counters were specifically set up for different types of to all questions or issues raised. The directors and management shareholders, i.e. shareholders attending the meeting in person, jointly responded to shareholders’ questions and clarified issues. individual shareholders, juristic persons, and fund managers or The company secretary recorded the minutes of the meeting custodians. For greater convenience and speed, the meeting and the votes cast under each agenda item. Additionally, 97 registration service made use of a bar code system and each the meeting proceeded in accordance with the announced shareholder or proxy holder was given a ballot bearing the agenda, and the Bank did not reorder, add, or revise any agenda same bar code as his or her registration bar code for voting on items, or modify previously issued information at the meeting, each agenda item. Meeting registration remained open to nor proposed any motions that had not been specified in shareholders during the meeting, allowing shareholders to the AGM Notice. register and attend the meeting at any time and vote on any remaining agenda item. 7 5 Following the meeting adjournment, the resolutions adopted at the 2017 AGM and the voting results for each agenda item The chairman of the Board presided as the chairman of the (in both Thai and English) were publicly disclosed via the SET meeting and all 16 directors of the Bank attended the 2017 Portal platform of the Stock Exchange of Thailand and on the AGM together with the chairmen of Board committees, the Bank’s website on the meeting date. In addition, the minutes Bank’s senior executives and the external auditors in order to of the AGM in Thai and English were submitted to the Stock clarify and respond to any questions or issues raised. Before Exchange of Thailand and made available on the Bank’s website proceeding with the meeting agenda, the company secretary within 14 days of the meeting date for quick and inclusive announced the voting procedure and vote counting practices access to shareholders. The minutes were also submitted to for each agenda item. Holders of the Bank’s ordinary and the Ministry of Commerce within the timeframe specified by preferred shares, including proxy holders who attended the law. The minutes contained the list of directors and executives meeting, were entitled to cast their votes on a one-share- who attended the meeting, the voting procedures, abstracts of one-vote basis. In order to increase the efficiency and speed the questions and issues raised and the answers or clarifications of the voting process, only the ballots for disapproval and provided by the Board and executives, and the resolutions abstention votes were collected. Voting and ballot counting were reached, together with the number of approval, disapproval, conducted openly, and the bar code system was employed in and abstention votes on each agenda item that required voting.

080-160 (4C) NEW_M5.indd 97 12/3/61 16:28 ANNUAL REPORT 2017

1.2 Dividend Payment 2 The Bank has a dividend policy which provides guidance that The final dividend was paid at the rate of Baht 4.00 per the dividend payout will typically be in the range of 30-50 share to holders of the Bank’s preferred and ordinary percent of its consolidated annual net profit with considerations shares on May 9, 2017 (28 days from the date of approval to long-term return for all shareholders. Dividends will be of the dividend payment by the shareholder meeting). considered in any year that the Bank, after deduction of all statutory and other reserves, posts a profit, provided that 1.3 Election of Directors on an Individual Basis there is no accumulated loss and that the Bank is able to maintain adequate capital funds to comply with the regulatory As part of the director election process, profiles of nominated requirements, as well as taking into consideration the need directors are disclosed in the notice of the AGM to support to preserve capital for its future business requirements. the shareholders’ considerations. Each profile includes The interim dividends and annual dividends will be paid information such as the nominee’s age, education, work within 30 days after approval by the Board or resolution experience, positions in other listed and non-listed companies, at the shareholder meeting. In proposing a dividend payment date of appointment as director, Board/Board committee for approval, the Bank discloses its Dividend Policy, dividend meeting attendance in the previous year, and type of rate and amount, including rationale and other relevant directorship. In the case of independent directors, the Bank information to support shareholders’ decision-making. additionally provides its definition of independent directors At the 2017 AGM, the meeting resolved to approve the dividend and other information, such as their relationships or conflicts payment from the Bank’s 2016 operating results to holders of of interest with the Bank, its parent companies, its 98 the Bank’s preferred and ordinary shares at the rate of Baht subsidiary companies, its associate companies and any 5.50 per share, equivalent to a total of Baht 18,696 million or other parties having the authority to control the Bank or approximately 39.3 percent of the 2016 consolidated net profit. juristic persons with potential conflicts of interest with Such dividend payment complies with the Dividend Policy of the Bank either at present or in the two years preceding the Bank and its details are summarized below: their appointment as independent directors of the Bank. Pursuant to the Bank’s Articles of Association, one-third of the directors shall retire by rotation at every AGM. At 1 the 2017 AGM, five directors retired by rotation. The Bank arranged for shareholders to elect directors to replace the The Board, at its meeting No. 12/2016 on August 23, 2016, outgoing directors by independently directing their votes resolved to approve an interim dividend payment at the toward each individual nominee as opposed to a slate rate of Baht 1.50 per share to holders of the Bank’s preferred director election. Similar to the voting on other agenda items, and ordinary shares. The interim dividends were paid to only disapproval and abstention ballots were collected and holders of the Bank’s preferred and ordinary shares on tabulated and the voting results for each director nominated September 16, 2016 (24 days from the date of approval for the election were clearly specified in the AGM minutes. of the interim dividend payment by the Board); and

080-160 (4C) NEW_M5.indd 98 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

1.4 Determination of Directors’ Remuneration 1.5 Communication Among the Bank’s Shareholders

As stipulated in the Bank’s Articles of Association approved The Bank does not interfere with communication among its by the shareholder meeting, a director is entitled to receive shareholders in any ways. Shareholders have complete liberty remuneration from the Bank in the form of gratuities, meeting to share information among one other and may request a allowances, rewards, bonuses, or other benefits consistent copy of the list of the Bank’s shareholders from the Business with the Articles of Association or the resolution of the Development Department of the Ministry of Commerce. shareholder meeting. Such remuneration may be a fixed amount or based on the criteria specified at the time which may be allowed to remain in effect until changed. Furthermore, a director is also entitled to a per diem and fringe benefits according to the regulations of the Bank. The Nomination, Compensation and Corporate Governance Committee is delegated to make recommendations on directors’ remuneration to the Board prior to proposing the remuneration to an AGM for approval on an annual basis. The Board has a policy that directors’ remuneration should be appropriate and commensurate to directors’ scope of duties and responsibilities, comparable to other major listed companies and commercial banks, and in line with prevailing business conditions and trends. 99

www.scb.co.th

080-160 (4C) NEW_M5.indd 99 12/3/61 16:28 ANNUAL REPORT 2017

2. Equitable Treatment of Shareholders

As stipulated in the Bank’s Corporate Governance Policy, the Bank who did not have any conflicts of interest in the all shareholders, i.e. major, minor, institutional, and foreign relevant agenda items of the AGM. To facilitate their decision, shareholders, are entitled to the same shareholder rights shareholders were given important information about these and are treated on an equitable and fair basis in accordance independent directors. Shareholders had the liberty to with the scope permissible by law. The principles of equitable appoint either one of the two independent directors or any treatment of shareholders, to which the Bank has other person of their choice as proxy. In addition, Proxy adhered, are provided on the Bank’s website (www.scb.co.th) Form A or Proxy Form C could be downloaded from the under the sequence of menu headings -- “About SCB,” Bank’s website for shareholders’ use as and when applicable. “Corporate Governance,” “Corporate Governance Policy,” and then “Section 3 - Rights and Treatment of Stakeholders.” 2.3 Ballots for Shareholder meeting

2.1 Invitation to Shareholders to Propose Agenda In the 2017 AGM, ballots were used for voting on every agenda Items, Candidates for Directorship, and Questions item, but only the ballots indicating disapproval and abstention Prior to the Shareholder meeting votes were collected and retained for future examination. To ensure that the voting process was efficient, accurate, All shareholders of the Bank are invited to propose matters speedy, and verifiable, a bar code system and PDA were to be included in the AGM agenda and to nominate qualified employed in tabulating votes. Before proceeding with the candidates for the director election by an AGM according meeting agenda, the company secretary informed the 100 the explicit criteria published on the Bank’s website. Share meeting of the voting and vote tabulation procedures. In holders may submit their proposals and questions to the addition, the Bank requested shareholders to return all unused company secretary via post or e-mail at company_secretary@ ballots to the Bank’s officers and kept these ballots as evidence. scb.co.th. The Nomination, Compensation and Corporate Governance Committee will consider shareholders’ 2.4 Internal Control and Risk Management proposals prior to submitting them to the Board for further consideration. Decision on the matter will be notified to the The Bank regularly monitors its internal control system and shareholders concerned for acknowledgment. Any proposals risk management system and annually evaluates the adequacy that are accepted will be included in the AGM agenda. of the systems, including related-party transactions and The Bank invited shareholders to propose agenda items, prevention of conflicts of interest. The monitoring and candidates for directorship, and questions for the 2016 AGM evaluation framework is based on the internal control three months prior to the end of the Bank’s accounting framework developed by The Committee of Sponsoring period, i.e. from October 1 to December 31, 2016. However, Organizations of the Treadway Commission (COSO) which the Bank did not receive any proposals from the shareholders. encompasses five key components: (1) control environment, (2) risk assessment, (3) control activities, (4) information 2.2 Proxy Appointments for Shareholder meeting and communications, and (5) monitoring activities. Details are discussed under the section of “Internal Control and Risk For every shareholder meeting, the Bank has made available Management” of this Annual Report. three types of proxy forms (Form A, Form B and Form C) as determined by the Department of Business Development 2.5 Conflict-of-Interest Reporting by Directors and of the Ministry of Commerce. Conditions and documents Persons with Management Authority required for the appointment of proxies are clearly described and do not cause any difficulties to the proxy appointment. The Bank requires directors and persons with management For the 2017 AGM, the Proxy Form B indicating specific authority (as defined in the Financial Institutions Business details of a proxy appointment was delivered to shareholders Act, B.E. 2551 (A.D. 2008)) to report to the company together with the Notice of the Annual General Meeting secretary on a quarterly basis any conflicts of interest of Shareholders. Shareholders had an option to appoint concerning themselves and their related parties as well as as their proxies one of the two independent directors of changes to any previously reported items. The company

080-160 (4C) NEW_M5.indd 100 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

secretary collects and submits copies of conflict-of-interest

reports to the chairman of the Board and the chairman of th the Audit Committee in compliance with the Securities and Thailand’s 8 National Conference on Exchange Act, B.E. 2535 (A.D. 1992). This information is used 1 Collective Action against Corruption by the Bank to monitor transactions between the Bank and directors, persons with management authority, and/or “Bright Spots: their related parties in accordance with applicable legal Lighting the way requirements. to a corruption free society” 2.6 Anti-Corruption

Anti-corruption continues to be a key part of the Bank’s internal organized by the Thai Institute of control and risk management as evident by, among others, Directors Association. the Bank’s membership in the Thailand’s Private Sector Collective Action Coalition Against Corruption (CAC). This membership underlines the Bank’s determination and commitment to fight corruption in all forms and to promote a Anti-Corruption Network culture of zero tolerance for corruption and bribery. All CAC 2 Program under the collaboration 101 members are required to undergo a membership certification of the Office of National process and the membership must be re-certified every 3 Anti-Corruption Commission years. As part of the recertification process, each CAC member is required to complete an anti-corruption self-assessment (NACC) and the Thai based on a highly rigorous standard. On November 10, 2017, Contractors Association. the Bank’s CAC membership was officially re-certified and valid for another three years. The Bank has enforced the Anti- Corruption and Bribery Policy, which serves as an anti- International Anti-Corruption corruption guideline, upon all companies in the SCB Financial Day campaign for Group. The policy has been communicated to directors, 3 executives, and employees at all levels to ensure that they recognize and understand their obligations and responsibilities “Zero Tolerance for in this respect and apply the policy in the workplace to their Corruption”. best abilities. All employees of the Bank are required to enroll in in-house training courses on topics related to anti-corruption, such as the e-learning courses on anti-money laundering/ Additionally, the Bank has informed external parties and combating the financing of terrorism (AML/CFT), and anti- stakeholders of its Anti-Corruption and Bribery Policy corruption and bribery. Employees must pass relevant tests through various channels, such as its website or credit card to complete these mandatory courses and must periodically statements. To extend anti-corruption and bribery initiatives enroll in refresher courses within a specified timeframe. to a wider context, the Bank has encouraged suppliers, as a Employees are also encouraged to participate in anti-corruption key stakeholder of the Bank, to adopt the same principles activities arranged by various agencies or institutions as and concepts by formulating the “SCB Supplier Code of detailed below: Conduct” as a guiding framework for its suppliers.

080-160 (4C) NEW_M5.indd 101 12/3/61 16:28 ANNUAL REPORT 2017

Employees:

The Bank has set up complaint channels, such as the The Bank recognizes the importance of continuous Whistleblower Hotline, for complaints about wrongdoing development of employees at all levels. Employees will or suspected frauds or corruption. To actively monitor and always remain the Bank’s most valuable assets. As such, evaluate compliance with the Anti-Corruption Policy, the Bank the Bank aims to recruit, develop, and retain talents as regularly assesses corruption and bribery exposure with the they are central to the Bank’s success in the short-term and Audit Committee being responsible for overseeing the Bank’s long-term strategic implementation and accomplishing its internal controls to ensure that they are adequate and mission and vision. The Bank offers a variety of training effective in protecting the Bank from the risk of corruption and courses to develop employees’ skills and capabilities, provides bribery as well as reporting the results to the Board of Directors. career advancement opportunities, as well as developing their professional expertise and positive attitude towards changes to be ready to face any challenges. 3. Role of Stakeholders It is the Bank’s policy to align employee compensations with 3.1 Treatment of Stakeholders the Bank’s short-term and long-term performance and ensure that compensations are appropriate and competitive. The Bank As one of the largest organizations within the Kingdom with has employed the Balanced Scorecard as a goal-setting and a long heritage of service to the country as the first Thai employee performance management tool which considers 102 bank, the Bank recognizes that it needs to respond to the three dimensions of performance: strategy, organizational interests of a broad range of stakeholders. The issue of health, and business performance. Senior executives of the responsibility to stakeholders is covered in more details in the Bank are jointly accountable for the Bank’s corporate KPIs 2017 Sustainability Report. The essence is summarized below: and the KPIs of business units under their supervision, as well as translating these top-level KPIs into clear and appropriate individual KPIs for employees. In addition, executives and employees are required to jointly develop individual Customers: development plans to support fulfilment of assigned duties. The Bank has also implemented a performance-based compensation structure that incorporates fair and accurate The Bank exists to serve its customers who encompass evaluation. In 2017, the Bank revisited its pay structure almost the entire spectrum of the Thai society. For all of them, to compensate employees fairly for their job value and the Bank aspires to provide a broad range of products and conducted a compensation survey to identify the industry services and to service their needs via branch, electronic, and and cross-industry benchmarks as a baseline for the Bank’s direct channels, such as SME business centers, wealth centers, compensation management. To increase employees’ wellbeing and customer service centers. The overarching aim is for the and motivation, the Bank offers attractive welfare and benefits Bank to be viewed as the main financial services partner for packages that are regularly fine-tuned, i.e. medical benefits, customers through reliable services, innovative products, scholarships, emergency financial assistance, pension fund and trustworthy conduct. Customer data security and and employee welfare loans, such as mortgage loan and auto confidentiality are strictly protected. On top of the reliable loan programs, retirement bonus, and savings cooperative. standards, the Bank has included these matters in the Employee Code of Conduct and communicated them to The Bank respects human rights and treats its employees employees to raise their awareness on the importance fairly and equally without discrimination based on gender, of data security and their adherence to applicable principles. age, religion, or disability. Employees are entitled to join labor The Bank measures its success in this regard through regular unions and are encouraged to voice their opinions that customer surveys and has consistently attained top satisfaction scores from such surveys.

080-160 (4C) NEW_M5.indd 102 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

contribute to the organizational development, such as Our priorities include activities that promote community improvement of the Bank’s policies, work processes, involvement and sustainable development in accordance with procedures, and product and service offering. Furthermore, the sufficiency economy philosophy. Furthermore, to instill the Bank respects intellectual property rights and deters a sense of volunteerism, the Bank has encouraged all infringement thereof by incorporating policies and guidelines employees to regularly participate in such activities. We also related to intellectual property in its Employee Code of aim to make banking accessible to all by responsibly offering Conduct. It is the responsibility of all employees to protect products and services and simultaneously promoting the Bank’s intellectual property from unauthorized use and financial literacy. dissemination and to respect intellectual property rights and copyrights owned by others. To assess the Bank’s health and The Bank is determined to operate in accordance with readiness for future changes, the Bank engaged third-party environmental laws and regulations and implement effective experts to conduct employee surveys. According to the 2017 safety and environmental management measures organizational health survey, the Bank’s score was ranked in internally. Furthermore, SCB supports natural resource the top decile of companies in Southeast Asia. The Bank and environmental conservation through awareness- believes that workplace happiness, employees’ wellbeing, raising campaigns and programs to educate and engage staff, and work-life balance are building blocks for the Bank’s business partners, customers and other CSR networks sustainable and solid growth. in this initiative. The Bank has increased its internal energy efficiency by upgrading lighting and electric systems. It 103 also has reduced paper use in both internal and external processes, arranged the “Living an Eco-Friendly Lifestyle” Shareholders: program to raise environmental consciousness among SCB employees, and started an internal campaign to encourage The Bank’s existence is made possible by capital contributions its employees to help reduce plastic bottle waste. of a large number of shareholders. The Bank aspires to provide transparent disclosure that meets high standards, equal SCB is also the first financial institution to participate treatment, and above industry-average, sustainable return in the nation’s pilot carbon-offset program to support on equity. Today, its success in this aim is evident in the Bank’s the domestic voluntary carbon credit market. The Bank market capitalization, which is the largest in the Thai financial worked with the Center of Excellence on Environmental services sector. Strategy for GREEN Business (VGREEN) of Kasetsart University to analyze and calculate the amount of carbon emissions from its energy and resource consumption.

Community and Environment:

The Bank aspires to behave in an ethical way as a model Regulators: corporate citizen, enhance the quality of life of members of the society, and be environmentally responsible with the aim The Bank operates in accordance with the principles of of fostering sustainable development in Thailand. The Bank has corporate governance with effective oversight and actively and consistently supported and carried out activities transparency as well as adopting the supervisory guidelines that are beneficial to the communities and the society at large applicable to financial institutions, the market conduct, and with particular attention to activities relating to local youth as the government’s policy to develop Thailand to become they are the foundation and drivers of the country’s sustainability. a cashless society. The Bank emphasizes long-term

080-160 (4C) NEW_M5.indd 103 12/3/61 16:28 ANNUAL REPORT 2017

strategic stability and works to enhance its multi-dimensional 3.2 Contact Channels for Stakeholders capabilities to raise its risk awareness and adaptability in pursuit of sustainable growth and return. The Bank provides multiple channels for stakeholders to directly contact the relevant units as follows:

- Customers or third parties can communicate with the Business Partners: Bank through branch staff or relationship managers, via the Call Center at 0-2777-7777, or by writing to senior executives of The Bank honors its obligations to business partners the Bank. All communications are monitored and responded with integrity and implements a transparent and corruption- within a specified period. The Bank also establishes a complaint free procurement process. The Bank has issued the “Supplier management team with a major role of identifying corrective Code of Conduct” to encourage suppliers to operate their measures and ensuring that relevant units resolve customer businesses ethically, respect freedom and rights of others, and complaints within applicable service level agreements published treat their workers responsibly in accordance with labor rights on the Bank’s website. and human rights principles, including occupational health, safety and environment standards.The Supplier Code of - Employees are informed that the Bank has multiple Conduct is communicated to its business partners on the channels to accept complaints and reports of misconduct Vendor Communication Day which is held annually and all from employees. Employees can voice their opinions and business partners of the Bank are required to, in writing, make a report on any unfair treatment, fraudulent activity, acknowledge and strictly comply with the Supplier Code or suspicion of misconduct, either directly to their supervisors 104 of Conduct. or through the following channels:

• SCB’s Whistleblower Policy provides a channel through which employees can report complaints, fraud or Competitors: non-compliance with the Bank’s regulations, rules, and Code of Conduct as well as acts that may cause damage The Bank ethically treats its competitors with transparency to customers and the SCB Group, including any unfair and honors its obligations to its competitors with integrity, treatment they might have suffered. The aim is to ensure accountability, and respects. To uphold fair business the Bank’s adherence to transparency and corporate practices, the Bank does not interfere with fair price governance principles. There are multiple channels for competition, respects intellectual property rights reporting complaints, fraud, or non-compliance, e.g. e-mail of others, and avoid intellectual property infringement. to [email protected]; post to PO Box 177, Chatuchak Delivery Post Office 10900; or telephone at 0-2544-2000. A summary on actions taken in this regard will be reported to the Audit Committee every quarter. Creditors: • The HR Call Center at 0-2544-4444 is a channel for The Bank strictly fulfills the obligations and agreements employees to make inquiries related to employment made with its creditors, including guarantee conditions and and/or benefits or to share opinions. its obligations toward effective capital and liquidity management to maintain financial strength and solid debt It is the Bank’s policy to maintain confidentiality and anonymity servicing ability. In an event that the Bank is unable to fulfill a of employees reporting misconduct or complaints for condition, the Bank will notify its creditors of such matter protection against retaliation or adverse consequences. Upon without delay to jointly consider possible solutions based notification by an employee, an independent, case-by-case on the principle of reasonableness and accountability toward investigation team will be quickly set up to investigate any creditors. The Bank is committed to making punctual issue or possible fraudulent behavior. If there are proven payments and debt repayments as well as maintaining grounds for a complaint, the matter will be escalated for good relationships with its creditors. disciplinary action in accordance with the following procedure:

080-160 (4C) NEW_M5.indd 104 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

• Employees submit opinions, reports, or complaints The Bank takes action as deemed appropriate in each case related to fraud via a range of channels, in which they can without disclosing the sources of information so as to protect choose to remain anonymous, if they so wish, and the confidentiality of informants. matter will be treated as confidential. • The Working Team conducts a preliminary investigation. Furthermore, all stakeholders can raise complaints, or make Progress will be reported to the informants if they have suggestions or comments to the Board and management of chosen to be identified. the Bank by writing to the following address: • The Working Team forwards proven cases of misconduct to relevant units in order to appoint an investigation committee according to the Bank’s regulations or to the Financial Crime & Security Services Division for further action.

105 Company Secretary The Siam Commercial Bank PCL, 21st Floor, Zone A, 9 Ratchadapisek Road, Chatuchak, Bangkok 10900 Also, the Bank has established a clear policy and procedure Telephone: 0-2544-6309 for handling complaints from customers, suppliers, and other stakeholders. All complaints are kept confidential, Fax: 0-2937-7931 investigated, resolved, and reported to the Audit Committee E-mail: [email protected] and the Board.

080-160 (4C) NEW_M5.indd 105 12/3/61 16:28 ANNUAL REPORT 2017

4. Disclosure and Transparency

4.1 Disclosure Policy and Practice

The Bank’s disclosure policy and procedures are incorporated public with a specified timeframe. For example, audited annual within the Corporate Governance Policy, and Investor Relations financial statements are released within 60 days from the end has been assigned the role and responsibility to disclose the of each fiscal year and reviewed quarterly financial statements Bank’s information in accordance with the following principles: are disclosed together with the Management Discussion and Analysis (MD&A) within 45 days from the end of each quarter to give investors a clear picture of the Bank’s operating results. 1 In addition to financial information disclosure to regulators, shareholders, and the public as mentioned above, the Bank Information being disclosed must be accurate, adequate, and regularly holds press conferences and media events as well as clear as well as being disclosed on a timely basis; issuing press releases to publicize and promote its activities.

Further, the Bank’s Corporate Governance Policy requires 2 directors and management to disclose their holdings of the Bank’s shares. Changes in the holdings of the Bank’s Disclosure must comply with all applicable rules and regulations; shares by directors and executives in 2017 are shown in the “Report of Bank Ordinary Shareholding by Directors 106 and Senior Management” section of this Annual Report. 3 4.2 Investor Relations Stakeholders including shareholders, investors, analysts, and interested persons must have equal rights of access to Investor Relations is a functional unit of the Bank that is the information disclosed by the Bank; and responsible for providing accurate, adequate, and clear disclosure of the Bank’s information to investors on a timely 4 basis in accordance with the Bank’s disclosure principles and applicable laws. In addition to its planned activities, such as Information that could affect the Bank’s share price, meetings with investors and analysts, investor events, and influence investors’ decisions, or affect the rights of roadshows, Investor Relations serves as the primary point shareholders must be immediately disclosed to the public of contact for all shareholders, analysts, fund managers, through the Stock Exchange of Thailand. bondholders, and rating agencies. The president and chief executive officer, the chief financial officer, and other senior The Bank has designated officers responsible for disclosing the executives regularly participate in investor relations activities. Bank’s information to regulators, shareholders, and the general

080-160 (4C) NEW_M5.indd 106 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

In 2017, disclosure One-on-one meetings/conference calls with investors and equity analysts activities undertaken 148 by Investor Relations Meetings with securities analysts 4 are summarized below: Investor conferences 7

Global roadshows 3

107

Investor Relations The Siam Commercial Bank PCL, 9 Ratchadapisek Road, Chatuchak, Bangkok 10900 The Investor Relations Code of Conduct is published on www. scb.co.th under the sequence of menu headings -- “About SCB,” Telephone: 0-2544-4358 “Investor Relations,” and then “Code of Conduct for Investor Relations”. Contact information of Investor Relations is as follows: E-mail: [email protected]

080-160 (4C) NEW_M5.indd 107 12/3/61 16:28 ANNUAL REPORT 2017

4.3 Auditors 1 Auditors’ qualifications are vetted by the Audit Committee The Board should have an appropriate number of members in terms of their independence, suitability, accountability, and ranging from five to 12. At the end of 2017, the Board was absence of any conflict of interest with respect to the Bank comprised of 16 members. The Bank views that the number and its subsidiaries, management, major shareholders, or is appropriate, considering the growing size and complexity related parties, as well as approval by the Securities and of the Bank’s business. Given rapid technological changes, Exchange Commission (SEC). The Audit Committee also it is necessary for the Bank to have directors with diverse reviews annual audit fees based on the scope of the audit and experience, knowledge, and expertise so that the Board proposes qualified auditors and appropriate audit fees to the can perform effectively. Board for consideration prior to proposing to the AGM for approval. 2 In 2017, the total audit fees of the Bank and its subsidiaries Chairman of the Nomination, Compensation and Corporate were Baht 29.3 million. The Bank and its subsidiaries paid Governance Committee (NCCG Committee) should be an fees for services other than statutory audits as follows: independent director. At present, the chairman of the NCCG - Audits and examination as required by regulators, such Committee of the Bank is not an independent director. as special audits, examination of banking returns, information The NCCG Committee is comprised of five directors and technology review covering electronic money transfer most of them are independent directors. The chairman of system, and audit of the Risk-Based Capital Reports the NCCG Committee is not an executive director, and 108 - Examination of foreign exchange kiosks decisions of the NCCG Committee are collectively made - Tax services based on majority vote. - Review of the embedded value report (insurance company) 3 - Review of financial reports and charts of account - Review of debt instrument issuance reports Disclosed information on shareholding structure should - Penetration testing to assess internet banking system clearly specify actual owners of SCB shares. The Bank’s security shareholders include nominee companies being custodians of foreign investors. Such appointment of nominee companies Non-audit fees to the external auditors were Baht 26.7 million, as custodians is considered a normal practice and is beyond of which Baht 11.5 million was paid in the fiscal year of 2017 the Bank’s control. while the outstanding amount of Baht 15.2 million will be paid in 2018. 4 4.4 Compliance with the Principles of Good Corporate The Bank should include in its policy a requirement that Governance directors and senior executives notify the Board or designated persons of their intention to trade SCB shares at least 1 The Bank aims to adhere to both national and international business day in advance of the transaction date. At present, corporate governance standards. However, certain practices there is no such requirement in the Bank’s policy, but the of the Bank did not comply, or complied only in part, with Bank already has in place clear regulations against insider the 2017 Corporate Governance Code for Listed Company trading. These regulations include Directors Code of Conduct, (CG Code) announced by the Securities and Exchange Employee Code of Conduct, rules governing securities Commission and the corporate governance principles trading by directors, executives and employees, insider stipulated by the Institute of Directors Association, due to trading rule, guideline on declaration of securities holding reasons set out below: by directors, executives, and employees, and non-trading period rules, all of which directors, executives, and employees must comply.

080-160 (4C) NEW_M5.indd 108 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

5. Responsibilities of the Board

5.1 Board Composition

At the end of 2017, the Bank had 16 directors, while the • The two executive directors (representing 12.5 percent number of total directors approved by the meeting of of the total directors) are Dr. Vichit Suraphongchai and shareholders was 17. The Bank selects its Board members Mr. Arthid Nanthawithaya. based on the criteria set forth by relevant regulators and with the aim of fostering diversity in terms of professional • The five non-executive directors (representing 31.25 skills, expertise, age, gender, and other key attributes percent of the total directors) are Dr. Chirayu Isarangkun that are essential for, and in line with, the Bank’s strategy. Na Ayuthaya, M.R. Disnadda Diskul, Mrs. Kannikar Chalitaporn, Mr. Chakkrit Parapuntakul, and Dr. Ekniti Nitithanprapas, Among the16 directors, there are 3 women and 13 men with diverse professional backgrounds in banking, accounting The names of the Bank’s directors and their respective number and finance, business administration, strategic management, of years as director are provided in Table 1. risk management, social development, corporate governance, laws, science and technology, and other experiences that are considered beneficial and relevant to the Bank’s business. Composition of the Board is as follows:

• The nine independent directors* (representing 56.25 109 percent of the total directors) are Mr. Anand Panyarachun, Khunying Jada Wattanasiritham, Mr. Prasan Chuaphanich, Dr. Kulpatra Sirodom, Mr. Ekamol Kiriwat, Mr. Krirk Vanikkul, Dr. Thaweesak Koanantakool, Mr. Weerawong Chittmittrapap, and Mr. Kan Trakulhoon.

* The term “independent director” has the meaning as specified in the Bank of Thailand’s Notification No. SorNorSor. 13/2552 Re: Corporate Governance of Financial Institutions, and the Capital Market Supervisory Board’s Notification No. TorJor. 39/2559, Re: Application and Approval for Offering Newly Issued Shares, and/or their amendments (if any). Moreover, the number of shares held by an independent director and his/her related parties combined shall not exceed 0.5 percent of the total voting shares of the Bank, or the Bank’s parent company, subsidiaries, or associate companies, or major shareholders, or the persons having the authority to control the Bank. This shareholding restriction of no more than 0.5 percent is the Bank’s standard, which is stricter than the standard set by the Capital Market Supervisory Board, which prohibits an independent director from holding more than 1 percent of the total voting shares of the company of which he/she is a director.

080-160 (4C) NEW_M5.indd 109 12/3/61 16:28 ANNUAL REPORT 2017

Table 1: Board of Directors (As of December 31, 2017)

Date of appointment Number of years Name Position as director in directorship

1. Mr. Anand Panyarachun Chairman of the Board and March 6, 1984 1st round: 7 years Independent Director (1984 - 1991) October 2, 1992 2nd round: 25 years 3 months (1992 - present)

2. Dr. Chirayu Isarangkun Director and Chairman of the September 18, 1987 30 years 3 months Na Ayuthaya Nomination, Compensation and Corporate Governance Committee

3. Dr. Vichit Suraphongchai Director and Chairman of the December 10, 1999 18 years 1 month Executive Committee

4. Khunying Jada Wattanasiritham 1) Independent Director, Chairman February 2, 1999 18 years 11 months of the Corporate Social Responsibility (Independent director: Committee, and Member of 8 years 2 months) the Nomination, Compensation and Corporate Governance Committee

5. Mr. Prasan Chuaphanich Independent Director and Chairman April 4, 2013 4 years 9 months of the Audit Committee

6. M.R. Disnadda Diskul 2) Director November 22, 1996 1st round: 2 years 2 months (1996 - 1999) April 5, 1999 2nd round: 18 years 9 months (1999 - present)

7. Dr. Kulpatra Sirodom Independent Director, Member of June 19, 2009 8 years 6 months the Audit Committee, and Member of the Corporate Social Responsibility Committee 110 8. Mr. Ekamol Kiriwat Independent Director and Member April 5, 2011 6 years 9 months of the Audit Committee

9. Mrs. Kannikar Chalitaporn Director, Member of the Executive January 21, 2002 15 years 11 months Committee, and Member of the Corporate Social Responsibility Committee

10. Mr. Krirk Vanikkul Independent Director and Member November 1, 2015 2 years 2 months of the Executive Committee

11. Dr. Thaweesak Koanantakool Independent Director and Member April 5, 2016 1 year 9 months of the Executive Committee

12. Mr. Weerawong Chittmittrapap Independent Director and Member September 22, 2014 3 years 3 months of the Nomination, Compensation and Corporate Governance Committee

13. Dr. Ekniti Nitithanprapas Director and Member of the November 25, 2015 2 years 1 month Nomination, Compensation and Corporate Governance Committee

14. Mr. Kan Trakulhoon Independent Director and Member April 5, 2016 1 year 9 months of the Nomination, Compensation and Corporate Governance Committee

15. Mr. Chakkrit Parapuntakul Director and Member of the November 25, 2015 2 years 1 month Corporate Social Responsibility Committee

16. Mr. Arthid Nanthawithaya President and CEO, Member of the April 2, 2015 2 years 9 months Executive Committee, and Member of the Corporate Social Responsibility Committee

Remark: 1) Khunying Jada Wattanasiritham qualified as an independent director from October 19, 2009. 2) M.R. Disnadda Diskul resigned as a director of the Bank, effective on January 31, 2018.

080-160 (4C) NEW_M5.indd 110 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

5.2 Directors’ Term of Position

One-third of the total number of directors must retire by performance are placed on the meeting agenda, particularly rotation at every annual general meeting of shareholders. matters related to corporate strategy; to allocate sufficient Directors who have held office for the longest time shall time for management to present clear and timely information; retire. In the case that the total number of directors is not to allow attending Board members to voice their opinions divisible by three, the number of directors to retire shall be and ask questions; and to ensure that Board resolutions are the number closest to one-third of all directors. Directors clear and the meeting minutes are complete and correct. The retiring by rotation may be re-elected to continue their office. chairman of the Board also presides over the shareholder meeting. Another key role of the chairman is to ensure that To enhance transparency and corporate governance, the the Bank’s governance practices, such as the composition of Bank has limited the office term of independent directors the Board, directors’ performance of duties, and succession to nine years. With regard to the tenure of directors as planning for top executives, comply with the adopted policies. members of Board committees, namely the Executive Committee, the Audit Committee, the Nomination, Compensation and Corporate Governance Committee, and Chairman of the Executive Committee the Corporate Social Responsibility Committee, their tenure shall be concurrent with their directorships. The chairman of the Executive Committee is a Board-appointed director with power and duties to oversee the Executive Committee whose key roles and responsibilities are to ensure 5.3 Segregation of Roles, Duties and Responsibilities that the Bank’s business and operations are in line with its 111 strategies, policies and regulations and to perform tasks The Bank has clearly segregated the positions and authority assigned by the Board with the goal of leading the Bank to of the chairman of the Board, the chairman of the Executive achieve its vision and mission while upholding its core values. Committee, and the president and chief executive officer to The chairman of the Executive Committee is appointed by enhance performance effectiveness, governance, and the Board as an authorized director with signing authority. transparency as follows:

President and Chief Executive Officer Chairman of the Board The Board appointed Mr. Arthid Nanthawithaya, a director of The chairman of the Board of Directors is an independent the Bank, as the president and chief executive officer to be director and shall not serve as the chairman of the Executive principally in charge of managing and leading the Bank’s Committee or the president and chief executive officer of business and operations in accordance with the Bank’s the Bank, or be involved in the Bank’s routine management. policies, strategy, and business plan as approved by the This practice conforms to the principle of segregation of Board and in compliance with applicable regulations while policy formulation and oversight duties from those in operations upholding the principles of corporate governance. The management. The key roles of the chairman of the Board are: president and chief executive officer is appointed by the to ensure that Board meetings are conducted effectively and Board as an authorized director with signing authority. matters that are essential to the Bank’s operations and/or

080-160 (4C) NEW_M5.indd 111 12/3/61 16:28 ANNUAL REPORT 2017

5.4 Directorships of Other Companies 5.5 Roles and Responsibilities of the Board of Directors

The Bank has established a clear policy on holding of positions by The Board of Directors is committed to pursuing the highest the Bank’s directors (and senior executives) in other companies. standards of ethical conduct and complying with the provisions The Bank’s directors are not allowed to hold directorship in of laws. The Board’s roles and responsibilities shall be in more than five listed companies, which is in line with the 2017 accordance with those specified by law, the Bank’s Memorandum CG Code and the corporate governance principles stipulated by and Articles of Association, and the resolutions of the the Institute of Directors Association. Furthermore, to comply shareholder meetings. Duties, responsibilities, and approval with the Bank of Thailand’s regulations on corporate governance authority of the Board also include those specified in the charter of financial institutions, holding of positions by directors and/or of the Board of Directors such as setting the Bank’s policies, senior executives of the Bank as a chairman, or an executive strategies, and financial targets. In the prior fiscal year, the Board director, or an authorized director with signing authority of conducted mid-year and year-end reviews of the Bank’s vision, other companies shall be limited to three business groups only. mission and business strategy which must be reviewed annually. The Board is also responsible for approving business policies In addition to the policies stated above, the Bank has an internal and directions proposed by management and overseeing the guideline pertaining to holding of positions in other companies performance of the management to ensure that policies which requires the Bank’s directors to notify the Nomination, and strategies are implemented and financial targets are Compensation and Corporate Governance Committee of achieved. The aim is to maximize long-term shareholder value their positions in other companies or organizations so that by taking into account the best interests of all stakeholders. the Nomination, Compensation and Corporate Governance The Board is also responsible for reviewing succession plan 112 Committee can review the appropriateness of the appointment for the president and chief executive officer position on a and compliance with relevant laws and regulations. The regular basis, establishing structures and processes for sound company secretary shall regularly report changes in positions risk management, audit, compliance and internal control systems, held by directors to the Board of Directors. Information on and reviewing such structures and processes regularly. Details positions held by the Bank’s directors in other companies, which on the roles, responsibilities and approval authority of the is disclosed to shareholders in this Annual Report, indicates that Board are available on www.scb.co.th under the section no director holds positions in more than five listed companies, “Charter of the Board of Directors”. and no director or senior executive of the Bank (executive vice president or higher) holds positions as chairman of the In addition to complying with relevant laws and regulations as board of directors and/or executive director and/or authorized mentioned above, the Board strictly abides by the Directors director of other companies in more than three business Code of Conduct, which provides ethical standards governing: a) groups. honesty, fairness and integrity, b) personal transactions, c) confidentiality, d) disclosure of interests, e) legal compliance, and f) payments, gifts, entertainment and travel. In addition, the Board, the Bank’s executives, and employees strictly adhere to the principles under the Corporate Code of Conduct, the Directors Code of Conduct, and the Employee Code of Conduct. Details regarding the Corporate Code of Conduct, the Directors Code of Conduct, and the Employee Code of Conduct are available on www.scb.co.th under the section “Code of Conduct.”

080-160 (4C) NEW_M5.indd 112 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

5.6 Committees • Audit Committee

The following committees have been set up by the Board and The Board first appointed the Audit Committee in 1998 with delegated to review or oversee specific matters to support responsibilities in several areas, e.g. financial reporting, internal the Board’s performance of duties. control, internal audit, corporate governance, and oversight of compliance with regulations, codes of ethics, codes of conduct, and risk management principles. These responsibilities include: 5.6.1 Board Committees to review the accuracy and adequacy of the Bank’s financial statements; to ensure that the management of the Bank has The Bank has appointed four Board committees, namely the established appropriate and effective internal control and Executive Committee, the Audit Committee, the Nomination, internal audit systems; to review the effectiveness of the Bank’s Compensation and Corporate Governance Committee, and regulatory and legal compliance monitoring system; to review the Corporate Social Responsibility Committee, to assist the the efficiency of the risk management system of the Bank and Board in considering specific matters as assigned by the Board. the SCB Financial Group; and to perform other duties as Meetings of each Board committee are scheduled in advance stipulated in the charter of the Audit Committee. Another key for the entire year and are held in accordance with the criteria role of the Audit Committee is to propose the appointment specified in the charter of each Board Committee and the and discharge of external auditors, including the corresponding Corporate Governance Policy. Duties and responsibilities of each audit fees, to the Board for consideration prior to seeking Board committee are clearly specified in its charter, which is approval from the AGM on an annual basis. Furthermore, the available on www.scb.co.th under the section of “Charter of the Audit Committee is responsible for evaluating performance 113 Board and Board Committees.” Details are summarized below: of external auditors. As of December 31, 2017, the Audit Committee was comprised of three independent directors, • Executive Committee namely Mr. Prasan Chuaphanich (chairman of the Audit Committee), Dr. Kulpatra Sirodom, and Mr. Ekamol Kiriwat. The Executive Committee is appointed by the Board. As of Their tenure on the Audit Committee is concurrent with December 31, 2017, the Executive Committee is consisted their directorships. Every member of the Audit Committee of five directors of the Bank, namely Dr. Vichit Suraphongchai has extensive knowledge and experience in reviewing financial (chairman of the Executive Committee), Mrs. Kannikar statements, particularly with two members of the Audit Chalitaporn, Mr. Kirk Vanikkul, Dr. Thaweesak Koanantakool, Committee holding advanced degrees in accounting and and Mr. Arthid Nanthawithaya. Their tenure on the Executive finance. Performance of the Audit Committee in 2017 is Committee is concurrent with their directorships. shown in the Audit Committee Report in this Annual Report.

The major duties and responsibilities of the Executive Committee • Nomination, Compensation and Corporate are to oversee and ensure that the Bank’s business and Governance Committee operations are in line with its strategies, policies, and regulations and to perform tasks as assigned by the Board. Key responsibilities The three main responsibilities of the Nomination, Compensation include screening all matters that are proposed to the Board and Corporate Governance Committee are: 1) To nominate for consideration, excluding those matters under responsibility individuals as directors of the Bank as well as proposing for the of other specific committees, and approving requests within Board’s consideration appropriate remuneration for members the scope of authority delegated by the Board and stipulated of the Board and Board committees prior to obtaining in the charter of the Executive Committee. In 2017, the approval at the shareholder meetings; 2) To nominate Executive Committee held 38 meetings and performance individuals as senior executives and ensure that their of the Executive Committee in 2017 is described in the remuneration is commensurate with their roles and Executive Committee Report in this Annual Report. responsibilities; and 3) To formulate the Bank’s corporate

080-160 (4C) NEW_M5.indd 113 12/3/61 16:28 ANNUAL REPORT 2017

governance policy and ensure compliance with corporate independent director), Dr. Kulpatra Sirodom, Mr. Chakkrit governance principles set forth by regulatory authorities. Parapuntakul, Mrs. Kannikar Chalitaporn, and Mr. Arthid Details regarding duties and responsibilities of the Nomination, Nanthawithaya. Performance of the Corporate Social Compensation and Corporate Governance Committee Responsibility Committee in 2017 is shown in the Corporate are provided in the charter of the Nomination, Social Responsibility Committee Report in this Annual Report. Compensation and Corporate Governance Committee.

As of December 31, 2017, the Nomination, Compensation and Corporate Governance Committee was comprised of 5.6.2 Major Committees Relating to five directors, namely Dr. Chirayu Isarangkun Na Ayuthaya Management of the Bank (chairman of the Nomination, Compensation and Corporate Governance Committee), Khunying Jada Wattanasiritham There are four key committees relating to management of the (independent director), Mr. Weerawong Chittmittrapap Bank, namely the Management Committee, the Risk Management (independent director), Mr. Kan Trakulhoon (independent Committee, the Assets and Liabilities Management Committee, director), and Dr. Ekniti Nitithanprapas. Their tenure on the and the Equity Investment Management Committee. The roles Nomination, Compensation and Corporate Governance and responsibilities of each committee are as outlined below: Committee is concurrent with their directorships. Performance of Nomination, Compensation and Corporate • Management Committee Governance Committee in 2017 is shown in the Report of the Nomination, Compensation and Corporate Governance The Management Committee is responsible for developing 114 Committee in this Annual Report. the Bank’s business plan and annual action plan, setting performance targets, reviewing performance, and formulating • Corporate Social Responsibility Committee business strategies for competitive advantage. The Management Committee is also in charge of monitoring operations The roles and responsibilities of the Corporate Social and making decisions on major projects of the Bank. In Responsibility Committee are to direct, supervise and develop 2017, the Management Committee held 59 meetings. the Bank’s CSR framework with the goal of contributing to Thailand’s economy, the society, and the environment. The • Risk Management Committee Corporate Social Responsibility Committee focuses on building a strong foundation, nurturing new initiatives, developing The Risk Management Committee is chiefly responsible for: networks, and sustaining success in the three following core overseeing and formulating risk management policies and areas: 1) youth development and learning enhancement, 2) risk governance of the Bank and companies in SCB Financial volunteer networks, and 3) development of the quality of life Group; aligning strategies with risk management policies; and environment. The Corporate Social Responsibility monitoring and controlling risks of SCB Financial Group Committee is appointed by the Board and is comprised of within an appropriate level; approving risk models; controlling, at least five members. All members of the Corporate Social monitoring and evaluating risk performance; and ensuring that Responsibility Committee are directors of the Bank and their companies in SCB Financial Group strictly comply with the tenure on the Corporate Social Responsibility Committee Bank’s risk management policies and the Bank of Thailand’s is concurrent with their directorships. As of December 31, requirements. The Risk Management Committee regularly 2017, the Corporate Social Responsibility Committee had five reports to the Audit Committee on areas for improvement for members, namely Khunying Jada Wattanasiritham (chairman proper compliance with the established policies and strategies. of the Corporate Social Responsibility Committee and In 2017, the Risk Management Committee held 11 meetings.

080-160 (4C) NEW_M5.indd 114 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

• Assets and Liabilities Management Committee that directors have sufficient time to study the information, unless an urgent necessity requires otherwise. Directors The Assets and Liabilities Management Committee is a key can request additional information through the company mechanism for the Bank’s management of liquidity risk, secretary. interest rate risk and exchange rate risk. The key responsibilities are to formulate policies and approve risk At each Board meeting, executives are invited to attend management strategies to address funding and liquidity, the meeting on agenda items concerning their areas of interest rate and foreign exchange risk faced by the Bank as responsibility in order to provide relevant details to the well as ensuring capital adequacy to support its business directors. In addition, the Board has specified in its charter direction including Tier II capital. The Assets and Liabilities that at least two-thirds of all directors shall be present during Management Committee also ensures that the Bank the voting procedure. effectively and efficiently manage its assets and liabilities to build resilience against adverse economic conditions and In 2017, there were 17 Board meetings, consisting of 12 unexpected shocks. In 2017, the Assets and Liabilities meetings that were originally included in the annual Board Management Committee held 10 meetings. meeting calendar and five special meetings. The meeting attendance of the Board was 89.71 percent and the • Equity Investment Management Committee meeting attendance of every individual director was above 75 percent. In addition, the Bank arranged two non- The Equity Investment Management Committee’s executive directors’ meetings (led by an independent responsibilities are to review and approve investment in, director) to provide a forum for non-executive directors or divestment of, equities in the Bank’s investment to discuss issues of their interests. Details of individual 115 portfolio, including the investment policy and operational directors’ meeting attendance in 2017 are as shown in Table 2. process associated with the investment. In 2017, the Equity Investment Management Committee held two meetings.

5.7 Board Meetings

Meetings of the Board of Directors are held in accordance with the rules and procedures specified in the charter of the Board and the Corporate Governance Policy. The meeting schedule of the Board is planned in advance for the entire year. The chairman of the Board determines the agenda of each Board meeting whereby directors and the president and chief executive officer may propose agenda items through the company secretary. In addition, the Board has a policy to call a meeting of non-executive directors on a semi-annual basis. An invitation to a Board meeting is sent to all directors at least seven days prior to the meeting date unless an urgent meeting is required to protect the Bank’s rights or benefits. Other relevant documents are sent to directors at least five business days prior to the date of each meeting so

080-160 (4C) NEW_M5.indd 115 12/3/61 16:28 ANNUAL REPORT 2017

Table 2: Individual Directors’ Meeting Attendance in 2017

Unit: Time

Name Board of Board of Executive Audit Corporate Nomination, Annual Directors Directors Committee Committee Social Compensation General (Extra)* Responsibility and Corporate Meeting of Committee Governance Shareholders Committee No. 194

1. Mr. Anand Panyarachun 12/12 5/5 1/1

2. Dr. Chirayu Isarangkun 12/12 3/5 12/12 1/1 Na Ayuthaya

3. Dr. Vichit Suraphongchai 12/12 5/5 35/38 1/1

4. Khunying Jada 11/12 3/5 8/8 11/12 1/1 Wattanasiritham

5. Mr. Prasan Chuaphanich 11/12 3/5 11/12 1/1

6. M.R. Disnadda Diskul 11/12 3/5 1/1

7. Dr. Kulpatra Sirodom 11/12 2/5 12/12 7/8 1/1

116 8. Mr. Ekamol Kiriwat 12/12 5/5 11/12 1/1

9. Mrs. Kannikar Chalitaporn 12/12 4/5 33/38 7/8 1/1

10. Mr. Krirk Vanikkul 12/12 5/5 38/38 1/1

11. Dr. Thaweesak Koanantakool 10/12 4/5 36/38 1/1

12. Mr. Weerawong Chittmittrapap 10/12 3/5 10/12 1/1

13. Dr. Ekniti Nitithanprapas 11/12 3/5 12/12 1/1

14. Mr. Kan Trakulhoon 11/12 5/5 11/12 1/1

15. Mr. Chakkrit Parapuntakul 11/12 5/5 6/8 1/1

16. Mr. Arthid Nanthawithaya 12/12 5/5 36/38 7/8 1/1

Remark: * Extra Board meetings are Board meetings not included in the original Board meeting calendar that has been set in advance for the entire year.

080-160 (4C) NEW_M5.indd 116 13/3/61 16:59 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

5.8 Board and Senior Executive Assessment 4 Board Chairman Assessment - This section evaluates the 5.8.1 Board and Board Committee Assessment performance of the chairman of the Board in, for example, effectively facilitating Board meetings, encouraging The Board assessment is conducted annually. The company contribution and different perspectives from all directors, secretary sends an assessment form to each director at effectively summarizing the outcomes from the meetings, the end of each year. Assessment results are compiled and and demonstrating leadership. presented by the Nomination, Compensation and Corporate Governance Committee to the Board for acknowledgment Ratings of the four sections under the 2017 Board assessment and discussion on further improvement of the Board’s ranged from very good to excellent, i.e. performance of the performance. The Board assessment is divided into four Board and Board committees in most of the categories parts: 1) Board assessment, 2) Board committee assessment, surveyed met or exceeded expectations. There were 3) Individual director assessment, and 4) Board chairman recommendations from the directors on areas for further assessment. Assessment criteria for each part are as detailed development. The Board acknowledged the assessment below: results and concurred with their implication on performance enhancement to further improve its effectiveness. 1 Additionally, to further improve the Board assessment Board Assessment - Eight key assessment topics are: effectiveness in accordance with the Corporate Governance Board composition, information management, Board Code for listed companies on the Stock Exchange of 117 processes, representation of shareholders and corporate Thailand, the Bank has engaged an external consultant social responsibility, managing the Bank’s performance, with professional expertise and experience in corporate management performance and succession planning, director governance to assess the Board’s performance on the four development and management, and risk management. components mentioned above every three years starting from 2012. 2 Board Committee Assessment - Key assessment topics are, for example, appropriateness of the number of the Board committees, composition of the Board committees, suitability of directors’ knowledge and experience for the Board committees, and directors’ understanding of their roles and duties. In 2017, the Board committee assessment was revised to engage all directors in the assessment of every Board committee for a more accurate reflection of each Board committee’s performance. 3 Individual Director Assessment - Key assessment topics are contribution, knowledge and abilities, collaboration, integrity, and support for the Board.

080-160 (4C) NEW_M5.indd 117 12/3/61 16:28 ANNUAL REPORT 2017

5.8.2 Senior Executive Assessment

The Nomination, Compensation and Corporate Governance constitute desired qualifications of directors: (1) Knowledge, Committee is responsible for the annual performance expertise, or experience in macro-level management, assessment of the Bank’s senior executives, namely the (2) Knowledge, expertise, or specific experience in the chairman of the Executive Committee, the president management of financial institutions, and (3) Knowledge, and chief executive officer, and senior executives at expertise, or experience in other fields deemed useful to the executive vice president level and higher. The assessment Board. The Nomination, Compensation and Corporate is subsequently proposed to the Board for approval. Governance Committee also regularly reviews and updates the board skill matrix for the effectiveness of the director 5.9 Procedure for Nomination of Directors and screening and nomination. Senior Executives The Nomination, Compensation and Corporate Governance The Nomination, Compensation and Corporate Governance Committee is also responsible for reviewing and screening Committee is responsible for screening and proposing to qualifications of candidates for positions at the level of executive the Board qualified candidates whose qualifications match vice president and higher, prior to proposing the nomination the Bank’s strategic requirements to serve as directors and to the Board for approval and subsequently to the Bank of members of Board committees. Nomination is based on each Thailand for endorsement of the senior executive candidate’s knowledge, capabilities, expertise, and past appointment. experience in relation to each vacancy’s requirements, the 118 board skill matrix, which is employed as a screening tool, and, The above-mentioned process for nomination, selection in the case of independent directors, the independence of and appointment of directors and senior executives is the candidate. The Bank proceeds with its due diligence conducted by the Board, the Nomination, Compensation process to ensure that qualifications of nominated individuals and Corporate Governance Committee, and relevant are not contrary to relevant laws and conform to the Bank’s management without any discrimination on race, religion, policies governing directors’ holding of position in other gender, marital status, or physical disability. companies. The Nomination, Compensation and Corporate Governance Committee selects candidates for directorship from the director pool of the Thai Institute of Directors 5.10 Succession Planning Association (IOD) and nominations by the directors and the shareholders of the Bank. After thoroughly vetting each The Board has assigned the Nomination, Compensation candidate’s qualifications to ensure compliance with laws and and Corporate Governance Committee the responsibility regulations, the Nomination, Compensation and Corporate of succession planning to ensure that the Bank has in place Governance Committee will propose the nomination to a succession plan that incorporates nomination, selection, the Board for consideration. Following the Board’s approval, and training for key positions, particularly the positions of the Bank will consult with and seek endorsement from the the chairman of the Executive Committee, the president and Bank of Thailand prior to proposing the nomination to the chief executive officer, and executives at the level of executive shareholders, if applicable, for approval of the appointment. vice president or higher. This is to ensure the continuity of the Bank’s management and business operations when To ensure that the director nomination and selection is in line executive positions become vacant due to new appointment, with the Bank’s strategic and business directions, the job transfer, retirement, resignation, or any other reasons. Nomination, Compensation and Corporate Governance Committee has refined the qualification screening criteria Also, the Bank has regularly refined the competency sets which set out three aspects of attributes and expertise that for many senior positions and job families to support the development of career road map and succession planning.

080-160 (4C) NEW_M5.indd 118 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

5.11 Director and Executive Remuneration

5.11.1 Director Remuneration

The Board has a policy that director remuneration shall be per year, and each member of the Board‘s remuneration of commensurate to the required duties and responsibilities Baht 1.2 million per year which are the levels that have been in of directors to meet stakeholder expectations and comply effect since 2000. In 2017, the Board of Directors, comprising with applicable laws and regulations. As a result, the Bank’s 16 directors, received a total remuneration of Baht 19.8 million. directors must possess appropriate experience and qualifications, and their remuneration shall reflect their At the same AGM, shareholders approved a bonus payment contributions and responsibilities accordingly. The Nomination, to directors at a rate of no more than 0.5 percent of Compensation and Corporate Governance Committee is dividend and authorized the Board to determine the responsible for proposing remuneration of members of the appropriate amount and allocation. Since shareholders Board and Board committees to the Board for consideration approved the 2016 dividend at Baht 5.50 per share or and, subsequently, to shareholders for approval each year. Baht 18,696 million in total, the directors’ bonus for 2016 was set at Baht 54 million or 0.29 percent of the dividend. At the 2017 AGM, the shareholders resolved to approve the chairman of the Board’s remuneration of Baht 1.8 million

119

Remuneration of the Board Committees in 2017 as approved by Shareholders at the 2017 AGM is shown below:

Committee Monthly remuneration Attendance fee (Baht) (Baht/meeting)

Executive Committee Chairman - - - Member 300,000 Audit Committee Chairman 75,000 15,000 Member 50,000 10,000 Nomination, Compensation and Corporate Governance Committee Chairman 45,000 15,000 Member 30,000 10,000 Corporate Social Responsibility Committee Chairman 45,000 15,000 Member 30,000 10,000

Remark: The chairman of the Executive Committee and the president and chief executive officer do not receive remuneration for serving on Board committees.

080-160 (4C) NEW_M5.indd 119 12/3/61 16:28 ANNUAL REPORT 2017

Table 3: Details of Monetary Remuneration for Individual Directors in 2017

Unit: Million Baht Name Board of Executive Audit Corporate Nomination, Directors’ Directors Committee Committee Social Compensation bonus for Responsibility and 2016 Committee Corporate performance Governance Committee

1. Mr. Anand Panyarachun 1.80 4.70 2. Dr. Chirayu Isarangkun 1.20 0.72 3.14 Na Ayuthaya 3. Dr. Vichit Suraphongchai 1.20 3.14 4. Khunying Jada 1.20 0.66 0.47 3.14 Wattanasiritham 1) 5. Mr. Prasan Chuaphanich 1.20 1.07 3.14

6. M.R. Disnadda Diskul 1.20 3.14

7. Dr. Kulpatra Sirodom 1.20 0.72 0.43 3.14

8. Mr. Ekamol Kiriwat 1.20 0.71 3.14

9. Mrs. Kannikar Chalitaporn 1.20 3.60 0.43 3.14

120 10. Mr. Krirk Vanikkul 1.20 3.60 3.14

11. Dr. Thaweesak Koanantakool 2) 1.20 3.60 2.32

12. Mr. Weerawong Chittmittrapap 1) 1.20 0.46 3.14

13. Dr. Ekniti Nitithanprapas 1.20 0.48 3.14

14. Mr. Kan Trakulhoon 3) 1.20 0.47 2.32

15. Mr. Chakkrit Parapuntakul 1.20 0.42 3.14

16. Mr. Arthid Nanthawithaya 1.20 3.14

17. Prof. Vicharn Panich, M.D. 2) 0.82

18. Mr. Chumpol NaLamlieng 3) 0.82

19. Mr. Yol Phokasub 4) 2.20

Total 19.80 10.80 2.50 1.94 2.60 54.00

Remark: 1) Khunying Jada Wattanasiritham and Mr. Weerawong Chittmittrapap received remuneration of Baht 1.03 million Baht 0.76 million, respectively for serving as indepondent director of a subsidiary of the Bank in 2017. 2) Dr. Thaweesak Koanantakool was elected by the AGM No. 193 as a director to replace Prof. Vicharn Panich, M.D., who completed his directorship term, effective from April 5, 2016. 3) Mr. Kan Trakulhoon was elected by the AGM No. 193 as a director to replace Mr. Chumpol NaLamlieng, who completed his directorship term, effective from April 5, 2016. Mr. Kan Trakulhoon was appointed as a member of the Nomination, Compensation and Corporate Governance Committee, effective from April 5, 2016. 4) Mr. Yol Phokasub resigned as a director, effective from September 16, 2016.

080-160 (4C) NEW_M5.indd 120 13/3/61 17:01 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

5.11.2 Executive Remuneration

The Nomination, Compensation and Corporate Governance such as medical benefits, annual medical check-up, life and Committee is responsible for proposing remuneration for accident insurance, welfare loans, and provident fund executives, including the president and chief executive contribution. In 2017, the Bank’s provident fund contribution officer, to the Board for approval. Remuneration should be for 16 executives as defined by the Securities and Exchange appropriate for and in line with the Bank’s policies as well as Commission, i.e. senior executive vice president level, was Baht reflects short-term and long-term corporate performance 9.81 million in total, while the provident fund contribution for and individual performance. Performance is assessed and 95 executives as defined by the Bank of Thailand, i.e. executive benchmarked against KPIs, which include financial indicators, vice president level and higher, was Baht 44.67 million in total. customer-related indicators as well as indicators relating to work process improvement and people development, to build a solid foundation for sustainable success of the Bank. 5.12 Director Orientation Remuneration is assessed based on transparent criteria, scope of responsibilities, and competitiveness within the financial The Bank arranges orientation meetings to brief all new industry and relative to other leading companies in Thailand. directors on the Bank’s vision, strategies, key business targets, performance highlights and relevant regulatory rules. Also, Based on the Securities and Exchange Commission’s definition, important documents are provided to new directors, i.e. the the term “executives” refers to “the manager or the next Director’s Manual, the Memorandum and Articles of Association four executives succeeding the manager, the persons holding of the Bank, the Bank’s Annual Report, and the Directors equivalent position to the fourth executive, and shall include Code of Conduct. These documents contain, among others, the persons holding the position of manager or equivalent in key information on roles and responsibilities of directors, 121 the accounting or finance departments.” In 2017, the number the Corporate Governance Policy, approval authority, of the Bank’s executives based on this definition was 16, prohibitions under applicable laws, roles and duties of Board and collectively they received remuneration in the form of committees, and the Anti-Corruption and Bribery Policy. monthly salaries, bonuses, and allowances of Baht 304.65 million (inclusive of eight executives who resigned and changed their positions during the year). On the other hand, 5.13 Director, Executive, and Employee Development the term “executives” according to the definition of the Bank of Thailand refers to executives at executive vice president 5.13.1 Director Development level and higher. In 2017, the number of Bank’s executives based on the Bank of Thailand’s definition was 95, and The Bank attaches importance to director development and collectively they received remuneration in the form of encourages directors to participate in courses or activities monthly salaries, bonuses, and allowances of Baht 1,358.47 to enhance their knowledge and performance as members million (inclusive of eight executives who resigned during of the Board of Directors and Board committees. This the year). includes courses and activities arranged by the Stock Exchange of Thailand, the Securities and Exchange Commission, the Thai Institute of Directors Association, and other 5.11.3 Other Benefits for Directors and Executives institutions. Directors are also encouraged to attend overseas seminars and activities on corporate governance practices Directors and executives of the Bank are entitled to receive and are regularly informed of relevant training courses. other welfare and benefits in accordance with the Bank’s Furthermore, the Board of Directors has directed the Bank regulations. Directors are entitled to medical benefits, including to arrange appropriate development programs on an ongoing an annual medical check-up, that are equivalent to those basis to ensure that directors remain current with skills offered to the Bank’s executives at executive vice president and knowledge relevant to their performance as members level or higher, and the chairman of the Board is additionally of the Board of Directors and Board committees. Additionally, entitled to a company car benefit. In 2017, four non-executive the Bank arranges workshops or seminars at least once a year directors of the Bank received medical expense reimbursement as a knowledge-exchange forum for directors. Details of of Baht 35,880. The Bank’s executives are entitled to welfare each director’s participation in development programs and other benefits similar to those offered to other employees, and training courses in 2017 are shown in Table 4.

080-160 (4C) NEW_M5.indd 121 12/3/61 16:28 ANNUAL REPORT 2017

Table 4: Participation of the Bank’s Directors in Training Courses and Development Programs in 2017

Name of Director Course Subject

1. Mr. Anand Panyarachun • The Amartya Sen Lecture Series on Sustainable Development on Globalisation, Inequality and Thailand 4.0”

2. Dr. Vichit Suraphongchai • The Amartya Sen Lecture Series on Sustainable Development on “Globalisation, Inequality and Thailand 4.0”

3. Khunying Jada • National Director Conference 2017 on “Steering Governance in A Changing World” Wattanasiritham • Nomination Director Event 1/2017 on “Nomination Committee Best Practice Guideline” • Cyber Risk Governance Guide for Boards of Directors • The Amartya Sen Lecture Series on Sustainable Development on “Globalisation, Inequality and Thailand 4.0” • Cyber Resilience 122 • Trends in Corporate Governance

4. Mr. Prasan Chuaphanich • Ethical Leadership Program (ELP) • Strategy Board Master Class (SBM) • IOD Annual General Meeting & Dinner Talk 1/2017 on “Board of directors and their roles in driving Thailand forward” • National Director Conference 2017 on “Steering Governance in A Changing World” • Board Matters and Trends (BMT) • Cyber Risk Governance Guide for Boards of Directors • Cyber Resilience • Trends in Corporate Governance

5. Dr. Kulpatra Sirodom • Boards’ Roles in Mitigating Cybersecurity Risks/ Threats Challenges and Solutions • The Amartya Sen Lecture Series on Sustainable Development on “Globalisation, Inequality and Thailand 4.0” • Cyber Resilience • Trends in Corporate Governance

080-160 (4C) NEW_M5.indd 122 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Organizer

• Cambridge Society of Thailand

• Thai Institute of Directors Association (IOD) • Thai Institute of Directors Association (IOD)

• Securities and Exchange Commission and Business Software Alliance • Cambridge Society of Thailand

• Bank of Thailand 123 • The Siam Commercial Bank PCL

• Thai Institute of Directors Association (IOD) • Thai Institute of Directors Association (IOD) • Thai Institute of Directors Association (IOD)

• Thai Institute of Directors Association (IOD) • Thai Institute of Directors Association (IOD) • Securities and Exchange Commission and Business Software Alliance • Bank of Thailand • The Siam Commercial Bank PCL

• Securities and Exchange Commission and Business Software Alliance

• Cambridge Society of Thailand

• Bank of Thailand • The Siam Commercial Bank PCL

080-160 (4C) NEW_M5.indd 123 12/3/61 16:28 ANNUAL REPORT 2017

Name of Director Course Subject

6. Mrs. Kannikar Chalitaporn • Trends in Corporate Governance

7. Mr. Krirk Vanikkul • The Amartya Sen Lecture Series on Sustainable Development on “Globalisation, Inequality and Thailand 4.0” • Cyber Resilience • 2017 High-level meeting (HML) on Banking Supervision for Asia Planned • Trends in Corporate Governance

8. Dr. Thaweesak Koanantakool • National Director Conference 2017 on “Steering Governance in A Changing World” • Board Matters and Trends (BMT) • Cyber Resilience

9. Dr. Ekniti Nitithanprapas • Board Matters and Trends (BMT) • Digital Economy for Management (DE4M)

124 • The Amartya Sen Lecture Series on Sustainable Development on “Globalisation, Inequality and Thailand 4.0” • Trends in Corporate Governance

10. Mr. Kan Trahulhoon • Chairman Forum 2017 on “The Role of Chairman in Leading Strategic Risk Oversight” • Cyber Resilience

11. Mr. Chakkrit Parapuntakul • Ethical Leadership Program (ELP) • Board Matters and Trends (BMT)

12. Mr. Arthid Nanthawithaya • The Amartya Sen Lecture Series on Sustainable Development on “Globalisation, Inequality and Thailand 4.0” • Digital Technology Field Trip Overseas

080-160 (4C) NEW_M5.indd 124 13/3/61 17:10 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

5.13.2 Executive and Employee Development

Organizer The Bank strongly believes that continuous development of employees at all levels is a key foundation for sustainable growth and business success, both in the short and the long • The Siam Commercial Bank PCL term. Therefore, the Bank has, since 2014, focused on implementing a systematic and comprehensive career development program to enhance knowledge, skills, and • Cambridge Society of Thailand competencies of employees through identifying competency sets for each position and a corresponding career road map. • Bank of Thailand This will enable the Bank to steer its people development efforts to be aligned with current business needs, future goals • Bank for International Settlements and strategies, and employee career advancement based on • The Siam Commercial Bank PCL proficiency and career preference. To become a learning organization, the Bank continues to adopt an integrated • Thai Institute of Directors Association (IOD) learning and development approach to promote learning • Thai Institute of Directors Association (IOD) outside the classroom and to reinforce integrative skills • Bank of Thailand development through, among others, coaching programs, e-learning modules, a management associate program for • Thai Institute of Directors Association (IOD) new executives, leadership development programs for senior executives, scholarship programs for domestic and • Institute of Research and Development for overseas education, and a project named I-Plearn, which Public Enterprises offers new and innovative “edutainment” learning tools. 125 • Cambridge Society of Thailand Details on executive and employee development in 2017 are • The Siam Commercial Bank PCL shown in the 2017 Sustainability Report.

• Thai Institute of Directors Association (IOD) 5.14 Oversight of Subsidiaries and Affiliates • Bank of Thailand The Bank, as the parent company of SCB Financial Group, attaches importance to aligning the business direction of these • Thai Institute of Directors Association (IOD) companies to the Bank’s policies and processes which contributes • Thai Institute of Directors Association (IOD) to the Group’s synergy and operational effectiveness.

• Cambridge Society of Thailand The Board of Directors has delegated the authority to the Executive Committee to nominate the Bank’s executives with • The Siam Commercial Bank PCL appropriate business experience and expertise as representative directors of companies in the SCB Financial Group to assist with policy and strategy formulation and ensure alignment with the Bank’s key policies. In this regard, the Bank has developed a representative director handbook, which defines the roles and responsibilities of representative directors as well as providing guidelines for representative directors whose key duty is to protect the rights and interests of the Bank and its shareholders.

080-160 (4C) NEW_M5.indd 125 12/3/61 16:28 ANNUAL REPORT 2017

Also, to promote transparency and prevent conflicts of 5.15.2 Compliance Function interest, the Bank, as the parent company, has established policies and regulations governing transactions among The Compliance Function serves as the Bank’s regulatory companies in SCB Financial Group to comply with applicable center, providing consultation and advice pertaining to regulatory and legal requirements. Furthermore, the Risk regulatory requirements and the Bank’s policies, practices, Management Committee has been established by the Board procedures, and controls as well as coordinating with the of Directors to monitor and oversee risk management regulators on behalf of the Bank. The Compliance Function practices of all companies in SCB Financial Group to ensure is also in charge of formulating internal policies, rules and compliance with risk management policies and regulations of regulations that govern the regulatory and legal compliance both the Bank and the Bank of Thailand. Risk management for all employees and executives of the Bank. It is also policies for companies in SCB Financial Group have been responsible for conducting due diligence on persons developed to provide standard guidelines for identifying, nominated as directors or executives of the Bank and its assessing, controlling, monitoring and reporting material subsidiaries to ensure that the nominees possess appropriate risks specific to each company in SCB Financial Group. qualifications that meet legal and regulatory requirements. The Compliance Function is under the leadership of Mr. Nopadol Mungonchai, executive vice president, head of 5.15 Board Support Unit compliance.

The Bank recognizes the importance and provides support to the following units and their personnel who are responsible 5.15.3 Company Secretary 126 for ensuring the Bank’s proper compliance with laws and regulations as well as the Board’s adherence to statutory The Board of Directors has appointed a company secretary and good corporate governance practices: to act under the provisions of law and as further instructed by the Board of Directors. Currently, Mr. Arak Sutivong, senior executive vice president, chief strategy officer, is the 5.15.1 Audit Function company secretary. The key roles are to support the Board with respect to statutory and supervisory requirements The Audit Function is an independent and business-neutral and good corporate governance. Functions of the company unit that has been established to improve and enhance secretary are shown on the Bank’s website (www.scb. internal control, including policies, practices, and procedures, co.th) under the “Functions of Company Secretary” section. and to ensure compliance with applicable regulations for SCB Group. Also, the Audit Function conducts regular audits, Educational background, work experience, and training identifies matters requiring attention, provides advice, and records of the persons mentioned above are provided in makes improvement recommendations on internal control, this Annual Report under “Information on Directors and risk management systems, and corporate governance practices. Executives of the Bank”. The Audit Function is led by Mr. Krieng Wongnongtaey, first executive vice president, head of audit, who is responsible for ensuring that the roles and responsibilities of the Audit Function are effectively carried out. The head of audit reports directly to the Audit Committee in an independent manner. The Audit Committee has the authority to consider and approve the appointment, removal, transfer, or dismissal of the head of audit, as well as the merit pay increase of the head of audit.

080-160 (4C) NEW_M5.indd 126 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

127

080-160 (4C) NEW_M5.indd 127 12/3/61 16:28 ANNUAL REPORT 2017

6.2 INTERNAL CONTROL ANDAND RISKRISK MANAGEMENT MANAGEMENT

1 01 03 04 05 The06 Bank regularly monitors and07 assesses the adequacy of 08 Control Environment08 02 its internal control and risk management systems based on the Committee of Sponsoring Organizations of the Treadway The Bank is committed to creating a culture and Commission or COSO’s guidelines. The guidelines specify environment of sound and effective internal control for all five key components for internal control, namely: (1) control internal units and companies in SCB Group with staff at environment, (2) risk assessment, (3) control activities, (4) every level strictly adhering to integrity and transparency. information and communications, and (5) monitoring The Bank recognizes that a sound internal control system activities. The Bank’s implementation of each component is is vital for the business to achieve its objectives sustainably. described below: The Bank has formal policies and procedures that require management and staff at every level in the organization to have roles, duties, and responsibilities in maintaining sound internal control. The Bank‘s internal control system is supported by an organizational structure that has clear supervisory lines, scopes of authority and responsibility for management and staff, and effective separation of duties, all of which are under the Board’s oversight. The Board of Directors is independent from management and has an oversight responsibility for developing an effective internal control 128 environment.

CONTROL ENVIRONMENT In 2017, the Bank initiated a policy to increase the capabilities of executives at every level. One of the key initiatives is an executive job rotation program which the Bank has implemented from top down starting with senior management to create long-term benefits for the Bank, RISK ASSESSMENT executives, and staff. Furthermore, the Bank also places importance on developing staff capabilities to keep up with technological changes that have played an important role in transforming the banking industry. Therefore, the Bank set up SCB Academy to equip staff with fundamental and new CONTROL ACTIVITIES knowledge as well as skills to think systematically and analytically in their approach to work and decision making. SCB Academy aims to help staff prepare for changes by creating a habit and mindset of continuous self-improvement. INFORMATION & COMMUNICATION The Bank has developed e-learning courses with learning modules in four key fundamental topics to develop staff

MONITORING ACTIVITIES

080-160 (4C) NEW_M5.indd 128 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

2 Risk Assessment

readiness by deepening and broadening their knowledge The Board of Directors has the authority to review and base and creating career progress opportunities in areas approve the Bank’s key risk management policies which that will constitute the Bank’s key businesses in the future. are delegated to three committees with risk management responsibilities: the Executive Committee, the Audit Committee, The Bank has a wide variety of whistleblower channels for and the Risk Management Committee. In addition, the Bank also complaints or reports on fraud or corruption through, the has other committees to manage specific risks based on the Whistleblower Hotline, e-mail at [email protected], principle of decentralization to ensure appropriate risk levels and letters addressed to the President and CEO, head of within a given approval authority framework. the Audit Function, or head of the Human Resource Function. These complaints and reports will be forwarded to The Bank recognizes the importance of risk management management of concerned functions for further corrective amid changes in both internal and external factors that affect actions who must also report the outcomes and actions the business as well as potential fraud or operational risk taken to the Audit Committee on quarterly basis. The Bank by considering both direct and indirect impacts or potential also welcomes any constructive feedback which can be sent impacts on its business. The Bank considers risk management to the President and CEO ([email protected]) to ensure that essential to every process of its business operations which management and staff effectively perform their duties with requires coordination and integration across all levels as well transparency, integrity, fairness, and accountability to gain trust as reporting to management and relevant committees. The from all stakeholders. Risk Management Committee shall report resolutions from its 129 meetings to the Executive Committee, the Audit Committee, The Bank periodically reviews the KPI & Incentives Policy to and the Board of Directors on a monthly basis to ensure that ensure proper market conduct for staff at every level through the Bank complies with applicable regulatory requirements and staff incentives, key performance indicators or performance can handle unforeseen risks to remain within its risk appetite. measurements, and the compensation process. The Bank has clear communications on a happy workplace and customer- The Bank continues to support and reinforce the Three Lines centric culture. The Code of Conduct is communicated to of Defense approach. Operational staff and management of new staff during orientation and reinforced for current staff every function (First line) are responsible for assessing risks through mandatory training every two years. The Bank also and setting internal control in their function with advice and promotes staff awareness and underscores the importance recommendations from support functions (Second line). The of professional and ethical conduct through VDO clips on a Audit Function (Third line) evaluates the effectiveness and variety of issues, such as maintaining confidentiality and efficiency of such internal controls. The Bank applies this disclosure of customer information, code of conduct for approach consistently from risk identification, control, sales of life insurance products, and code of conduct for sales monitoring, and assessment. The Bank raises staff awareness of mutual fund products, to ensure integrity, honesty, and in a variety of ways, such as having the Operational Risk accountability in every action in accordance with the Bank’s policy. Management Function, the Compliance Function,

080-160 (4C) NEW_M5.indd 129 12/3/61 16:28 ANNUAL REPORT 2017

3 Control Activities

and first line functions jointly communicate with staff, The Bank has formal policies, regulations, operational organizing workshops to translate the approach into actual procedures, manuals, and instructions, which are reviewed execution, and setting Technology Risk Management and updated on a regular basis or upon any significant guidelines. incidents or changes. This extends to policies on general controls over the information systems, including data center operations, SCB Group Risk Management Policy requires executives to data networks, systems development and testing, IT system manage and monitor key risks to be within the risk appetite, maintenance, and IT security procurement and management. and report material risks to senior executives and relevant committees. For operational risk management, each function Furthermore, the Bank specifies scopes of duty and approval is required to complete a RCSA using the Bowtie analysis, a authorization for executives at each level in the Bank’s standard tool for communicating risk management scenarios operational regulations, such as regulations for procurement, with pictograms showing risk factors, as well as the causes administrative expenses and capital budget, and credit and and effects. It also explains risk control tools and reinforces investment approval. The Bank focuses on segregation of the importance of evaluating and testing the effectiveness of duties as a key control mechanism to ensure adequate and these tools to reduce as much risk exposure to the Bank as proper controls for operations at every level within the possible. In 2017, over 80% of the Bank’s functions completed organization and to maintain a system of checks and RCSAs which were signed off by their respective heads. balances, particularly for activities susceptible to conflicts 130 of interest. The Bank incorporates external factors with potential business impacts from changes in the business environment The Bank has linked IT usage in operation processes with as input into its overall strategy formulation. The Chief Risk general control over IT systems. The IT Function has written a Office has formulated plans to support the Bank’s key goals risk and control assessment form for key areas which include with risk management as the main consideration. The Bank technology operations, testing & platforms, technology security has developed a risk materiality assessment process that & risk, project delivery, and persistent teams and solutioning, covers all material risks which are: strategic risk, credit risk, to ensure that risk and control effectiveness remain at an market risk, IRRBB, liquidity risk, operational risk, reputational acceptable level. In addition, the Bank sets up appropriate risk, people risk, technology risk, and concentration risk. controls over the following processes: IT acquisition, The Bank reviews this process annually to ensure that the development, maintenance, infrastructure, and security process has been applied consistently and regularly with control. appropriate risk management, controls, and monitoring. The Bank had engaged an external consultant to review SCB Group’s internal control systems and make recommendations to improve operational effectiveness and efficiency to conform with international standards. Upon the project completion in early 2017, the Audit Committee has periodically monitored the implementation progress of the recommended actions, particularly for high-risk issues.

080-160 (4C) NEW_M5.indd 130 12/3/61 16:28 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

4 5 Information and Communications Monitoring Activities

The Bank and SCB Group has created innovations The Bank monitors and assesses its internal controls to on IT and communications to enhance their business ensure effectiveness and efficiency in performing its functions competitiveness as a response to new global challenges of risk monitoring and assessment as designed with from financial technology, changing business environment, sufficient robustness to manage risks that are evolving. and rapidly evolving consumer behaviors from digital trends. The Compliance Function is responsible for reviewing and The Bank has developed IT systems to facilitate constant monitoring the operations of all internal functions within communications so that the Board of Directors, executives, the Bank and SCB Group to ensure their compliance and other stakeholders, such as shareholders, investors, with important regulations, laws, rules, and regulatory and regulators, can access key information that is accurate, requirements. The Audit Function performs an independent complete, reliable, and timely. The Bank emphasizes the role of providing assurance and consultation to ensure importance of IT security in processing transactions and that the internal processes have sound governance, risk protecting customers’ confidential data to ensure that management, and internal control. The Audit Function also its security measures remain sound and appropriate. identifies root causes of problems encountered during the audit, which are directly reported to the Audit Committee The Bank sets up channels for internal communication for consideration on a monthly basis, as well as following within the Bank and SCB Group to circulate policies, up to ensure that all concerns have been resolved. regulations, procedures, manuals, and other essential 131 information for prompt and proper acknowledgement The Audit Committee and the Board of Directors have and compliance by all executives and staff. In addition, considered the results of the internal control adequacy the Bank has a designated and secure communication assessment and discussed follow-up actions with the Bank’s channel for both internal and external persons to safely management. The Audit Committee’s and the Board of report any information. Directors’ opinions are that the Bank’s internal control system and risk management system are appropriate In 2017 the Bank organized activities to raise staff and adequate for its business operations. This conclusion awareness and knowledge on operational risks. Examples concurs with the opinion of the external auditors. are VDO clips on different ethical issues in the Code of Conduct with an emphasis on confidentiality and disclosure of customer information, 7 Operational Risks (7OR), and Tell Us Anything campaign. The Bank added a channel to report operational risks via the LINE application so that risk incidents can be reported anywhere, anytime.

080-160 (4C) NEW_M5.indd 131 12/3/61 16:28 ANNUAL REPORT 2017

6.3 RELATED PARTY TRANSACTIONS

The Bank places great emphasis on safeguarding against Intra-Group Transactions Policy and SCB Group Risk 01 02 03 04 05 misusing06 internal information for personal07 gain by directors and 08Management Policy 08 staff. Accordingly, the Bank has set policies, rules, and approval procedures for related party transactions, as well as guidelines Governance on Intra-Group Transactions on related party transaction execution and disclosure to prevent and manage any potential conflicts of interest in a transparent To enhance transparency for intra-group transactions and fair manner. within SCB Group and to avoid any conflict of interest between SCB and other shareholders in businesses that are not wholly The Bank’s rules and approval procedures for related party owned by SCB, the Bank has established the Intra-Group transactions and conflicts of interest transactions are as follows: Transaction Policy which has been approved and reviewed annually by the Board of Directors. This policy entails risk • Strict compliance with regulations of the Stock Exchange management for intra-group transactions and controls for of Thailand, the Securities and Exchange Commission material transactions which are classified into two types of and notifications of the Capital Market Supervisory Board significant transactions, namely, credit transactions (loans, regarding related party transactions and conflicts of interest investments, obligations or lending-like transactions) and transactions. In particular, any directors or executives non-credit transactions (those other than loans, related to a transaction that may lead to a conflict of interest investments, obligations). The policy ensures that such must be excluded from making decisions or consideration transactions comply with regulations and requirements of regarding such transaction. Furthermore, the Company the Bank of Thailand, the Stock Exchange of Thailand, and 132 Secretary must have a formal record of related directors the Securities and Exchange Commission, as well as local or executives to the issue under consideration in meeting laws and regulations in the countries that SCB operates. minutes, if applicable. • Policies on pricing and terms and conditions for transactions between the Bank and related entities are required to be on an arm’s length basis and, broadly, on the same terms as those applied to transactions with unrelated third parties. • The Board of Directors (excluding any director who has conflict of interest) has approval authority for loans, investments, obligations or lending-like transactions with the Bank’s major shareholders or businesses that are related to the Bank, directors and persons with management authority, or their related persons (as defined by the Financial Institution Business Act B.E. 2551(2008)). • The Bank has also established the Intra-Group Transactions policy to ensure compliance with applicable regulations and to prevent conflicts of interest.

080-160 (4C) NEW_M5.indd 132 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Information Disclosure

A key part of this Policy requires intra-group transactions to The Bank’s policy on disclosure of market-sensitive be executed without special terms and conditions that are information focuses on timely, transparent, and adequate materially different from other risk-equivalent transactions. disclosure of all material information as well as prohibiting In the absence of equivalent transactions, intra-group misuse of internal information, either directly or indirectly. transactions must follow standard market practices with The Bank discloses related party transactions and enforceable contracts, proper documentation and record connected transactions as defined by the Stock Exchange keeping, as well as approval authority based on risk and of Thailand in the notes to the financial statements in the materiality. Annual Report in accordance with information disclosure requirements and guidelines. Related party transactions Related Party Transaction Trends and Policy Outlook are reported to the Audit Committee on a quarterly basis. SCB’s emphasis on good governance principles has led to In 2017, the Bank did not have related party transactions with a clear policy on related party transactions to comply with sufficient materiality to require disclosure per the Stock laws, regulations, and notifications of the Stock Exchange Exchange of Thailand’s criteria. Information pertaining to of Thailand and the Securities and Exchange Commission other related party transactions is disclosed in the notes to on related party transactions which include the acquisition the financial statements. and disposal of assets of listed companies, as well as compliance with the Bank of Thailand’s notifications. SCB’s related party transactions may arise as part of its normal business operations for which the Bank has 133 clear and appropriate internal approval measures and procedures.

080-160 (4C) NEW_M5.indd 133 12/3/61 16:29 ANNUAL REPORT 2017

THE NOMINATION, COMPENSATION AND CORPORATE 6.4 GOVERNANCE COMMITTEE REPORT

The Nomination, Compensation and Corporate Governance 4 01 02 03 04 05 (NCCG)06 Committee is comprised07 of five directors, three 08 08 of which are independent directors and two are non- Selected and nominated candidates for directorship from executive directors including the NCCG Committee’s the director pools maintained by the Thai Institute of Directors chairman. The NCCG Committee performs duties and Association (IOD) and the Bank as well as the lists of responsibilities set forth in the NCCG Committee Charter candidates proposed by the Bank’s directors and shareholders and the Bank’s Corporate Governance Policy. (if available) based on qualifications and well-roundedness in terms of knowledge, competence, experience, and In 2017, the NCCG Committee held 12 meetings and education. The NCCG Committee also places importance undertook the following key activities: on the due diligence process to check each nominee’s qualifications prior to obtaining approval from the Bank of Thailand and subsequently from the Board and/or 1 the shareholders.

Studied the Corporate Governance Code for Listed Companies (CG Code) established by the Office of 5 Securities and Exchange Commission in 2017 to identify gaps in the Bank’s corporate governance practices prior to Determined appropriate compensation for the chairman and requesting the Board’s approval to incorporate the members of the Board as well as Board committees based on CG Code into the Bank’s corporate governance practices the assigned scope of duties and responsibilities, the Bank’s 134 and informing the Board of the enforcement guidelines profits, and the overall economic condition prior to to ensure compliance with the CG Code. obtaining authorization from the Board and the shareholders. The Committee sets a cap on directors’ performance bonuses at 0.5% of the dividend payout. The amount of 2 directors’ bonuses paid as reward for their 2016 performance was Baht 54 million or 0.29% of dividends. Reviewed the Corporate Governance Policy and the Board Charter to align them with the principles laid out in the CG Code as well as the Bank’s current operational guidelines. 6

Arranged the performance assessment of the Board, 3 including the Chairman of the Board, individual directors, and the Board committees. In 2017, the Committee changed Revised the NCCG Committee Charter pertaining to the Board assessment forms to have all directors evaluate the director nomination criteria by specifying the desired performance of every Board committee to give a more qualifications for each independent director and for the accurate reflection of each committee’s performance. board skills mix as well as using the board skill matrix to assess each director’s knowledge, expertise and experience to ensure alignment with the Bank’s strategy and business direction as well as having diverse board composition with skills and expertise deemed necessary for the business.

080-160 (4C) NEW_M5.indd 134 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

7 12

Considered and endorsed the Collective Action Coalition Arranged for the performance assessment of the Chairman Against Corruption (CAC) membership re-certification of of the Executive Committee, the President and Chief the Bank and its subsidiaries which must be conducted Executive Officer, and senior executives of the Bank every three years. against established targets and performance criteria. The NCCG Committee also reviewed management’s proposal on the compensation policy and appropriate compensation 8 and benefits for the aforesaid senior executives by considering their assigned scope of duties and responsibilities, Considered and endorsed the appointment of senior executives performance, general economic conditions, and relevant to fill positions that are either newly created, vacant, industry benchmarks, prior to obtaining approval from or necessitated by organizational restructuring before the Board. obtaining approval from the Board and the Bank of Thailand.

13 9 Delegated the task of studying the integrity programs Recommended for the Board’s approval the new of Bang Mun Nak School and Chon Buri Hospital to be organizational structure that focuses on customer centricity applied to the Bank’s internal functions with the goal of and collaboration by reorganizing internal functions creating a role model of integrity to drive the organization 135 for greater clarity on accountability. and to resolve internal issues. The integrity program has been piloted among 4,000 employees in the Operations Function and the Retail and Small SME Credit Function. 10

Recommended for the Board’s approval rotation among senior executives which was a part of the Bank’s professional development program designed for executives at all levels. In addition to training, job rotation is another important skill development approach for executives to gain new experience and insights which encourages continuous development.

Recommended for the Board’s approval the new criteria ( D r. C h i r a y u I s a r a n g k u n N a A y u t h a y a ) for merit increase and variable bonus considerations for Chairman of the Nomination, Compensation and new employees to be in line with the industry practice. Corporate Governance Committee

080-160 (4C) NEW_M5.indd 135 12/3/61 16:29 ANNUAL REPORT 2017

6.5 THE EXECUTIVE COMMITTEE REPORT

01 02 03 04 05 The06 Executive Committee of SCB07 consists of 5 members, two 08 08 of which are executive directors and three are independent directors with the Chief Executive Officer being one of the members. The Executive Committee’s role, duties, and responsibilities are set forth in the Executive Committee Charter with the key responsibilities being management oversight and reviewing any matters to be proposed to the Board of Directors, except for matters that are delegated to other committees.

In 2017, the Executive Committee held 38 meetings with the following important activities:

1 3

Monitored management’s progress of strategy implementation, Approved other important matters within the Executive particularly matters related to SCB Transformation Program, Committee’s scope of authority which are: risk management, and reviewed strategic plans, financial targets, and plans for 2018 investment, disclosure of financial information, foreign businesses, and subsidiaries within SCB Group, as well as reviewing such 136 prior to proposing to the Board of Directors. matters under the Board’s approval authority. 2 4 Approved loans within the Executive Committee’s scope of authority and reviewed loans under the Board’s approval Reviewed the Executive Committee charter for Board of authority, as well as regularly reviewing major borrowers’ Directors’ approval with an amendment to permit the Executive credit statuses and ensuring that impacts on customer Committee to hold an electronic meeting as well as establishing businesses from any incidents or situations were reported a clear process for proposing matters for the Executive promptly for further actions. Committee’s considerations to make the meetings more efficient.

(Dr. Vichit Suraphongchai) Chairman of the Executive Committee

080-160 (4C) NEW_M5.indd 136 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

137

080-160 (4C) NEW_M5.indd 137 12/3/61 16:29 ANNUAL REPORT 2017

FINANCIAL REPORTS

138

7.1 BOARD OF DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS 7.2 AUDIT COMMITTEE REPORT 7.3 MANAGEMENT DISCUSSION AND ANALYSIS 7.4 COMPARATIVE KEY FINANCIAL STATISTICS 7.5 INDEPENDENT AUDITOR’S REPORT 7.6 FINANCIAL STATEMENTS AND NOTES

080-160 (4C) NEW_M5.indd 138 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

FINANCIAL REPORTS

139

080-160 (4C) NEW_M5.indd 139 12/3/61 16:29 ANNUAL REPORT 2017

7.1 BOARD OF DIRCTORS RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Board of Directors is responsible for the Bank’s financial The Audit Committee, entirely comprising independent 01 02 03 04 05 06 statements,07 the consolidated financial08 statements of the08 directors, has been assigned by the Board of Directors the Bank and its subsidiaries that are provided in this Annual responsibility for overseeing the quality of the Bank’s financial Report. The financial statements are prepared in accordance reports and internal control system. In this respect, the with accounting standards generally accepted in Thailand, Audit Committee’s opinion regarding such matters is stated using appropriate accounting policies that are applied on a in this Annual Report under the Audit Committee’s Report. consistent basis. The financial statements are also prepared after careful consideration and, when applicable, use of In the context of the nature and scale of the Bank’s business, appropriate estimates and judgments. All significant the Board of Directors is of the view that the Bank’s overall information related to the accounting policies and the internal control system is adequate and appropriate, and financial statements, including the conventions and practices can provide reasonable assurance that the financial statements used for the preparation of these financial statements, are of the Bank, including the consolidated financial statements adequately disclosed in the notes to the financial statements of the Bank and its subsidiaries for the year ended December in order to facilitate understanding and use as well as for 31, 2017, which reflect the financial state and performance the benefit of the shareholders and general investors. of the Bank and its subsidiaries at the said date, are reliable Independent auditors have audited these financial statements, pursuant to applicable financial reporting standards, and and their audit opinion is stated in the audit report. are correct, complete, and accurate according to accounting standards, related laws and regulations. The Board of Directors has required the management of the Bank to adopt and maintain effective internal control and 140 risk management systems to provide reasonable assurance on the accuracy, reliability and adequacy of the Bank’s accounting; the safeguarding of its assets; and the prevention against fraud and irregularities which have material effects on the accuracy and reliability of the Bank’s financial reports.

(Mr. Anand Panyarachun) (Mr. Arthid Nanthawithaya) Chairman of the Board President and Chief Executive Officer

080-160 (4C) NEW_M5.indd 140 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

7.2 AUDIT COMMITTEE REPORT

The Audit Committee of Siam Commercial Bank PCL is Key activities in 2017 01 02 03 04 05 06 comprised07 of the following three08 independent directors: 08 • Review of Financial Reporting 1. Mr. Prasan Chuaphanich The Audit Committee reviewed the quarterly, half-year, Chairman of the Audit Committee and annual financial statements of SCB and its subsidiaries, 2. Assoc. Prof. Dr. Kulpatra Sirodom including their consolidated financial statements, related Member of the Audit Committee transactions, and transactions with potential conflicts of 3. Mr. Ekamol Kiriwat interest. SCB Group’s financial statements were prepared Member of the Audit Committee in accordance with the Thai Financial Reporting Standards (TFRS) and the requirements set forth by the Bank of Mr. Krieng Wongnongtaey, first executive vice president and Thailand and by the Securities and Exchange Commission. head of the Audit Function, serves as the secretary to the The Audit Committee convened regularly with external Audit Committee. auditors and the Bank’s finance executives to review material issues, such as the accuracy and completeness of financial The Audit Committee performs the duties set forth in the statements, significant accounting adjustments, accounting Audit Committee Charter which has been approved by estimates, accounting policies, and the scope of audits. In the Board of Directors and conforms to the Securities and additions, the Committee also ensured that information Exchange Commission’s guidelines on best practice. The disclosure was correct, complete, and adequate and that Audit Committee reviews and ensures that SCB and its the external auditor and their opinion were independent subsidiaries have strong corporate governance, adequate with an emphasis on properly communicating key audit 141 risk management system and internal control, as well as matters (KAMs) in the auditor’s report as required by effective and efficient internal auditing. Structures and the new auditing standard. The Audit Committee systematic processes have been put in place to raise the communicated with the auditor and the Bank’s finance Bank’s internal audit standards to bring the Internal Audit executives to ensure that financial statements of the Bank function to a position of a trusted advisor that creates and SCB Group reflect all material financial transactions and sustainable long-term value. incidents and comply with legal requirements and Thai Financial Reporting Standards with reliability, timeliness, In 2017, the Audit Committee held 12 meetings with and adequate information disclosure to benefit users management and senior executives from relevant functions, of the financial statements. in addition to regular meetings with the Audit and the Compliance functions as well as meetings with external The Audit Committee also had one separate auditor auditors both with and without management’s presence. meeting without management’s presence to discuss The Committee reports the outcomes of each meeting auditor independence, information access and audits, along with recommendations to the Board of Directors for particularly material issues in the preparation of the financial acknowledgement and, if warranted, for further guidance statements, risk control and management regarding the on specific matters. Bank’s transformation, and possible cases of fraudulent and illegal conduct of directors and executives under Section 89/25 of the Securities and Exchange Act, B.E. 2559 (2016). In 2017, the auditor reported no material concerns or any suspicious behavior.

080-160 (4C) NEW_M5.indd 141 12/3/61 16:29 ANNUAL REPORT 2017

• Risk Management Review fraud or serious operational errors. The Committee The Audit Committee reviewed the effectiveness and also held a meeting with the audit committees of major the appropriateness of risk management policies of the subsidiaries to exchange opinions and to ensure that Bank and SCB Group and held monthly meetings with key risk issues have been reviewed and monitored. executives responsible for risk management to review risk management approaches and plans for the Bank The consulting project commenced in 2016 to thoroughly and SCB Group as well as monitoring potential risk issues evaluate SCB Group’s internal control systems and and making recommendations for future improvement. make improvement recommendations to meet international standards and practices was completed The Committee and management discussed both in early 2017. The Committee acknowledged these internal and external risk factors as well as significant recommendations and periodically monitored risk issues, particularly on credit risk, provision adequacy, management’s implementation progress, particularly for and the Bank’s project finance underwriting process, to high-risk issues. ensure that the Bank and SCB Group have effective guidelines and measures to manage potential risks from Because information technology plays a central role in current operations and future plans. The Committee also this period of digitization, the Bank’s IT system is of great ensured that the risk management systems and importance to the Audit Committee. The Committee procedures overseen by the Chief Risk Office and the regularly met with executives in IT functions to keep Risk Management Committee are adequately robust to abreast with IT related issues and ensure that the Bank is handle any unanticipated scenarios. ready for the digitization era in terms of hardware, 142 software, and people. In 2017, the Bank engaged an • Internal Control and Audit external consultant to develop a technology risk The Audit Committee evaluated the Bank’s system of management framework to help the Bank achieve a high internal control against the COSO framework which has standard in its IT operations. five components: 1) control environment, 2) risk assessment, 3) control activities, 4) information and In addition, the Audit Committee ensured the communication and 5) monitoring activities. Key issues for independence of the Bank’s internal audit, approved the each component are summarized in the related sections Internal Audit Charter review, as well as reviewing, of this report. making recommendations, and approving the annual strategic and audit plans. The Committee monitored The Audit Committee ensured compliance with laws, related the implementation progress of the audit plan and audit regulations, and the Three Lines of Defense management findings on a monthly basis to promote good governance model by reviewing the monthly audit reports prepared and increase the effectiveness and efficiency of internal by the Audit Function as well as internal control assessments audit. Moreover, the Committee also followed up on the performed by management, external auditors, the Bank of corrective action plan and looked into people training Thailand, and other relevant regulating agencies. The and development as well as recruiting of the Audit Function Committee followed up with management to ensure that to ensure adequate resources, both in terms of quantity corrective action has been taken for all issues and problems and quality, to keep up with drastic changes in the have been resolved by addressing the root causes to digitization era. prevent recurrence, particularly for high-risk issues,

080-160 (4C) NEW_M5.indd 142 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

In 2017, the Audit Committee authorized the use of Function to communicate and discuss compliant issues Management Controls Awareness (MCA) by the Audit to ensure that all functions have effective compliance Function to evaluate risk management and control of monitoring and control and all operational processes adhere function managers to ensure that they can competently to applicable regulations. The Committee regularly met mitigate risks and protect the Bank from potential losses. with the subsidiaries’ management to discuss steps and This tool also raises management’s risk awareness and approaches to improve their operational processes and promotes effective internal control. prevent costly mistakes that may cause damage to the Bank as a whole. The Committee reviewed the quarterly summary of complaints which were mainly reported through the In 2017, the Committee reviewed the accuracy of Bank’s whistleblower channel to assess whether any information to renew the membership of Thailand’s complaints are indication of potential fraud, misconduct, Private Sector Collective Action Coalition Against or corruption. Furthermore, the Committee held meetings Corruption. SCB and two other subsidiaries, with complaint management functions to ensure that the namely SCB Securities Co., Ltd. and SCB Asset complaint management process is transparent and appropriate Management Co., Ltd., have successfully extended their given constant changes in customer behaviors and services. memberships for another 3 years starting from November 10, 2017. From the activities mentioned above, the Audit Committee concludes that the overall internal control environment is The Audit Committee reported all significant appropriate and adequate for the Bank and its subsidiaries regulatory issues and changes that may affect the Bank’s which concurs with the external auditor’s opinion. The Audit operations to the Board of Directors and approved the 143 Committee judges that the first executive vice president Annual Compliance Report for submission to the Bank and head of Audit Function has appropriately and of Thailand and the Securities and Exchange Commission. effectively performed his duties and that his annual compensation adjustment was based on his performance • Related-Party Transactions and Conflicts of Interest (see the profile of the first executive vice president and The Audit Committee reviewed, oversaw, and advised on head of Audit Function on page 336). material related-party transactions, particularly those that may be construed as involving conflicts of interest by • Regulatory Compliance applicable regulations, before reporting to the Board of The Audit Committee reviewed SCB and its subsidiaries’ Directors and/or shareholders to ensure that those compliance with applicable laws and regulations of transactions are transparent, reasonable, and in the regulatory agencies, such as the Bank of Thailand, the interests of the Bank and its shareholders. In 2017, the Anti-Money Laundering Office, and the Securities and Bank did not have any related transactions with sufficient Exchange Commission, especially for issues regarding materiality to be disclosed based on the Stock Exchange the Anti-corruption and Bribery Policy and the Anti-Money of Thailand’s criteria. Information on other related Laundering and Combating the Financing of Terrorism transactions is disclosed in the notes to the financial (AML/CFT) regulations. The Committee held monthly statements. meetings with executives in charge of the Compliance

080-160 (4C) NEW_M5.indd 143 12/3/61 16:29 ANNUAL REPORT 2017

• Appointment of External Auditor The Audit Committee is responsible for selecting The Audit Committee is of the opinion that the financial the Bank’s external auditor every year with consent from statements of SCB and its subsidiaries to be accurate and the Board of Directors and shareholders’ approval at the complete with adequate disclosure and adherence to annual general meeting. In 2017, KPMG Phoomchai financial reporting standards. The Committee is satisfied Audit Ltd. was appointed as the auditor for SCB and its with auditor’s independence and professionalism in subsidiaries, except for some overseas branches in which performing its duties. Moreover, the Bank places a high local laws require appointing another firm. Auditor level of importance on its internal control systems with appointment was based on the auditor’s qualifications, adequate and appropriate policies, procedures, and systems knowledge, ability, audit experience in the banking industry, for risk management. The Bank also has sound corporate audit approach, independence according to the code of governance, adequate risk management, appropriate and conduct established by the Federation of Accounting effective internal controls and audits with active monitoring Professions and the requirements of the Securities and of changes to prepare for any potential risks that may arise in Exchange Commission, and past audit quality as well as the future. appropriate audit fees.

• Others In 2017, the Audit Committee made the following amendments to the Audit Committee Charter: 144 - Change the name of performance standards from “the Internal Audit Standards” to “the International Professional Practices Framework (IPPF)” - Change the reference from “the Securities and Exchange Act B.E. 2551 (2008)” to “the Securities and Exchange Act B.E. 2559 (2016)”.

As in the prior years, members of the Audit Committee undertook a self-assessment review to enhance the efficiency of the Committee’s performance.

The Audit Committee performed the duties that have been assigned by the Board of Directors and set forth in the Charter of the Audit Committee with integrity, prudence, transparency, and independence. Opinion and recommendations by the Committee were made to benefit all stakeholders equally by putting the interests of (Mr. Prasan Chuaphanich) the Bank and stakeholders as a priority. Chairman of the Audit Committee

080-160 (4C) NEW_M5.indd 144 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

7.3 MANAGEMENT DISCUSSION AND ANALYSIS

For the year ended December 31, 2017 01 02 03 04 05 06 07 08 08 IMPORTANT DISCLAIMER: The information contained in this document has been obtained from several sources, and Siam Commercial Bank PCL (the “Bank”) cannot confirm, in all cases, the accuracy and completeness of such data, particularly those sourced from outside the Bank. In addition, any forward looking statements are subject to change as market conditions and actual outcomes may differ from forecasts. The Bank makes no representation or warranty of any type whatsoever on the accuracy or completeness of the information contained herein.

Siam Commercial Bank PCL reported (audited) consolidated On the other hand, total income increased by 2.2% from the net profit of Baht 43,152 million for 2017, a 9.4% yoy previous year as net interest income, net fee income and net decrease from Baht 47,612 million in 2016. Lower net profit was trading and FX income grew by 4.4% yoy, 6.7% yoy and 5.6% primarily due to the Bank setting higher prudent provisions to yoy, respectively countering the sharp drop in net insurance align existing expected loss principles to those required under premiums and gain on investments which fell by 49.5% yoy new accounting standard effective in 2019 as well as an 11.6% and 36.5% yoy, respectively. rise in operating expenses from investment in digital banking.

Net Profit and Total Comprehensive Income 145 Unit: Baht million

Net Profit and Total Comprehensive Income 2017 2016 % yoy (Consolidated)

Net interest income 92,310 88,449 4.4% Non-interest income 43,903 44,885 -2.2% Non-interest expenses 57,650 51,644 11.6%

Operating profit 78,563 81,690 -3.8% Impairment loss on loans and debt securities 25,067 22,528 11.3% Income tax 10,291 11,493 -10.5% Non-controlling interests 53 57 -7.8%

Net profit (attributable to shareholders of the Bank) 43,152 47,612 -9.4% Other comprehensive income (loss) 4,919 (2,291) NM Total comprehensive income 48,071 45,322 6.1%

EPS (Baht) 12.69 14.01 -9.4% ROAE 12.4% 14.8% ROAA 1.5% 1.7%

NM denotes “not meaningful”

080-160 (4C) NEW_M5.indd 145 12/3/61 16:29 ANNUAL REPORT 2017

I. Income Statement for 2017 (Consolidated basis)

1. Net interest income Unit: Baht million

Net Interest Income and Yield 2017 2016 % yoy (Consolidated)

Interest income 125,113 122,443 2.2%

- Loans 95,788 94,844 1.0%

- Interbank and money markets 5,028 4,206 19.5%

- Financial leases 11,024 10,479 5.2%

- Investments 13,185 12,827 2.8%

- Others 88 87 1.1%

Interest expenses 32,804 33,994 -3.5%

- Deposits 19,006 20,225 -6.0%

- Interbank and money markets 1,218 1,034 17.8%

146 - Borrowings 3,092 3,904 -20.8%

- Contribution to the Deposit Protection Agency & FIDF 9,419 8,810 6.9%

- Others 69 21 226.5%

Net interest income 92,310 88,449 4.4%

Net interest margin 3.23% 3.27% -0.04%

Yield on earning assets 4.38% 4.52% -0.14%

Yield on loans 5.38% 5.58% -0.20%

Yield on interbank 1.75% 1.62% 0.13%

Yield on investment 2.27% 2.28% -0.01%

Cost of funds* 1.45% 1.55% -0.10%

Cost of deposits** 1.38% 1.48% -0.10%

Spread (yield on earning assets – cost of funds) 2.93% 2.97% -0.04%

Note Profitability ratios use the average of the beginning and ending balances as the denominator. * Cost of funds = Interest expenses (including the contribution to DPA & FIDF) / Average interest-bearing liabilities. ** Cost of deposits includes the contribution to the Deposit Protection Agency and FIDF fee.

080-160 (4C) NEW_M5.indd 146 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Net interest income in 2017 was Baht 92,310 million, a 4.4% 25 basis point decrease in lending rate in 2017. Furthermore, yoy increase from 2016. The higher net interest income was net interest income increased due to efficient cost management driven by 4.9% loan growth despite lower loan yields from a and higher interest income from interbank and money markets.

SCB Interest Rates Apr 29, 15 May 21, 15 Jul 20, 15 Dec 21, 15 Mar 1, 16 Apr 7, 16 Apr 25, 16 Oct 12, 16 May 16, 17

Lending rate (%) MLR 6.625 6.525 6.525 6.525 6.525 6.275 6.275 6.275 6.025 MOR 7.50 7.40 7.37 7.37 7.37 7.37 7.12 7.12 6.87 MRR 8.12 7.82 7.87 7.87 7.87 7.87 7.62 7.62 7.37 Deposit rate* (%) Savings rate 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 3-month deposits 0.90-0.95 0.90 0.90 0.90-1.60 0.90 0.90 0.90 0.90 0.90 6-month deposits 1.15-1.20 1.15 1.15 1.15 1.15 1.15 1.15 1.15 1.15 12-month deposits 1.50 1.50 1.50 1.30 1.30 1.30 1.30 1.40 1.40

Aug 24, 11 Nov 30, 11 Jan 25, 12 Oct 17, 12 May 29, 13 Nov 27, 13 Mar 12, 14 Mar 11, 15 Apr 29, 15

Policy rate (%) 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50

147 * Excluding special campaigns which generally offer significantly higher rates but have different terms and conditions from the 3, 6, 12 month term deposits.

Yield on Earning Assets, NIM and Cost of Funds (%)

Yield on earning assets 4.71% 4.52% 4.38%

3.27% 3.23% Net interest margin 3.18%

1.84% Cost of funds 1.55% 1.45%

2015 2016 2017

Yield on loans 5.86% 5.58% 5.38%

Cost of deposits 1.85% 1.48% 1.38%

080-160 (4C) NEW_M5.indd 147 12/3/61 16:29 ANNUAL REPORT 2017

2. Non-interest income

Unit: Baht million

Non-Interest Income 2017 2016 % yoy (Consolidated)

Fee and service income 36,855 34,379 7.2%

Less fee and service expenses 6,531 5,965 9.5%

Net fee and service income 30,324 28,414 6.7%

Net earned insurance premiums 49,232 52,314 -5.9%

Less net insurance claims 46,366 46,634 -0.6%

Net insurance premiums 2,866 5,680 -49.5%

Net fee and insurance premium 33,189 34,094 -2.7%

148 Net trading and FX income 7,090 6,714 5.6%

Share of loss of associates (9) (11) NM

Dividend income 1,032 1,119 -7.8%

Other income 990 433 128.4%

Non-interest income excluding gain on investments 42,292 42,350 -0.1%

Net gain on investments 1,611 2,535 -36.5%

Total non-interest income 43,903 44,885 -2.2%

NM denotes “not meaningful”

Non-interest income decreased slightly by 2.2% yoy to 6.7% yoy in net fee income from mutual fund fees and Baht 43,903 million in 2017 due to lower net insurance bancassurance fees, and higher net trading and FX income. premiums and gain on investment despite an increase of

080-160 (4C) NEW_M5.indd 148 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Net Fee Income Breakdown (%)

15.9% Others1/ 17.5% 16.0%

11.0% 9.7% Loan related fee 12.1%

22.8% Mutual fund 19.1% 17.2%

7.0% 4.7% 8.0% Bancassurance fee

18.2% 18.7% 17.5% GMTS2/

30.3% 28.2% 26.1% Bank cards

2015 2016 2017 149

1/ Others include brokerage fee, fund transfer, remittance, etc. 2/ GMTS stands for Global Markets and Transaction Services, which includes cash management, trade finance, corporate trust

3. Non-interest expenses Unit: Baht million

Non-Interest Expenses 2017 2016 % yoy (Consolidated)

Staff costs 27,488 24,597 11.8% Premises and equipment expenses 11,554 10,823 6.7% Tax and duties 4,417 4,262 3.6% Director remuneration 99 97 2.3% Other expenses 14,092 11,865 18.8%

Total non-interest expenses* 57,650 51,644 11.6%

Cost to income ratio 42.3% 38.7%

* Including loss on the sale of repossessed cars of Baht 462 million in 2017 and Baht 540 million in 2016.

080-160 (4C) NEW_M5.indd 149 12/3/61 16:29 ANNUAL REPORT 2017

Non-interest expenses increased by 11.6% yoy to Baht 57,650 II. Balance sheet as of December 31, 2017 million in 2017 primarily due to higher staff costs (+11.8% yoy) (Consolidated basis) from both annual salary adjustments and more hiring in areas that require new skills and capabilities. Moreover, an increase As of December 31, 2017, the Bank’s total assets stood at in other expenses (+18.8% yoy), with the main component Baht 3,024 billion, an increase of 3.8% from the end of 2016. being marketing and promotion expenses, and higher premises Details on the consolidated balance sheets are provided in and equipment expenses (+6.7% yoy) also contributed to the the following sections: higher non-interest expenses.

1 Cost-to-Income Ratio Loans (%) As of December 31, 2017, total outstanding loans (net of deferred revenue) stood at Baht 2,035 billion, a 4.9% increase from the end of 2016. The yoy overall loan growth was contributed by the corporate and retail segments while the volume of SME loans remained unchanged yoy. 35.6%* 38.7% 42.3% The 4.9% loan growth was in line with the Bank’s loan growth target for 2017 of 4-6%.

150

2015 2016 2017

* Includes large invesment gains from the sale of equity invesment in 3Q15 and one-time expense from a fraud case in 1Q15. Excluding these items, cost-to-income ratio would stand at 36.5%

4. Loan loss provisions

Loan loss provisions in 2017 were set at Baht 25,067 million or 126 bps of total loans which included additional prudent provisions of Baht 5,000 million that the Bank set aside to align existing expected loss principles to those required under new accounting standard effective in 2019. As a result of higher provisions, the coverage ratio increased to 137.3% in 2017 from 134.3% in 2016.

080-160 (4C) NEW_M5.indd 150 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Unit: Baht million

Loans by Segment Dec 31, 17 % Dec 31, 16 % % yoy (Consolidated) Corporate 760,912 37.4% 712,272 36.7% 6.8% SME 364,039 17.9% 364,544 18.8% -0.1% Retail 909,781 44.7% 862,232 44.5% 5.5% - Housing loans* 630,079 31.0% 607,439 31.3% 3.7% - Auto loans 179,933 8.8% 168,684 8.7% 6.7% - Other loans 99,769 4.9% 86,109 4.5% 15.9% Total loans 2,034,732 100.0% 1,939,048 100.0% 4.9%

* Including all home mortgage loans, some of which are from segments other than retail. This is different from the sectorial loans listed on table VI: Addition Financial Information.

Details on changes in loan volume by customer segments Auto loan portfolio are as follows: (Baht billion) 151 • Corporate loans increased by 6.8% owing to M&A deals of large corporate customers. 169 169 180

• SME loans were flat yoy, mainly due to the Bank’s My Car, continued stringent underwriting criteria. 16% 18% 17% My Cash • Retail loans grew by 5.5% yoy.

- Housing loans rose by 3.7% yoy, a slower pace compared with the 5.4% growth in 2016, as competition in the housing 25% 25% 27% Used car loans market intensified.

- Auto loans increased by 6.7% yoy, following an expansion in all segments, namely used car, new car, and “My Car, My Cash” segments (“My Car, My Cash” is a personal loan product which is structured as a hire-purchase contract, using the borrower’s automobile as the underlying collateral). 59% 57% 56% New car

- Other loans (largely personal loans and credit card receivables) grew by 15.9% yoy, driven by an increase in both credit card loans and personal loans. 2015 2016 2017

080-160 (4C) NEW_M5.indd 151 12/3/61 16:29 ANNUAL REPORT 2017

2 Deposits Unit: Baht million

Deposits Dec 31, 17 % Dec 31, 16 % % yoy (Consolidated) Demand 78,274 3.7% 61,585 3.0% 27.1% Savings 1,281,892 61.3% 1,148,768 56.7% 11.6% Fixed 732,291 35.0% 815,919 40.3% -10.2% - Less than 6 months 164,034 7.9% 201,141 9.9% -18.4% - 6 months and up to 1 year 176,335 8.4% 392,309 19.4% -55.1% - Over 1 year 391,922 18.7% 222,469 11.0% 76.2%

Total deposits 2,092,457 100.0% 2,026,272 100.0% 3.3%

Gross loans to deposits ratio 97.2% 95.7%

CASA - Current & Savings 65.0% 59.7% Accounts (%)

152

3 As of December 31, 2017, total deposits stood at Baht 2,092 Shareholders’ equity billion, a 3.3% increase from the end of 2016. The yoy increase As of December 31, 2017, shareholders’ equity stood at Baht mainly came from higher savings (+11.6% yoy) and current 363 billion, an 8.8% increase from the end of 2016, driven deposits (+27.1% yoy), following the Bank’s strategy to increase by appropriations of net profit over the year. Net profit was the proportion of low cost deposits (CASA). Consequently, appropriated for the dividend payment of Baht 4.00 per share in the Bank’s CASA rose to 65.0% at the end of 2017 from accordance with the resolution of the Annual General Meeting 59.7% at the end of 2016. of Shareholders in April 2017, the interim dividend payment of Baht 1.50 per share in accordance with the resolution of As loans grew by 4.9% yoy while deposits rose by 3.3% yoy, the Board of Directors meeting in August 2017, and gain on the loan-to-deposit ratio on a consolidated basis increased remeasurement of available-for-sale investments. to 97.2% at the end of 2017 from 95.7% at the end of 2016. Furthermore, the Bank’s liquidity ratio stood at a high level of The book value per share as of December 31, 2017 was Baht 26.9%. In this regard, the Bank continues to ensure that there 106.93 (3,399 million ordinary and preferred shares at the end is adequate liquidity to cushion against unexpected shocks of 2017), up by 8.8% from Baht 98.28 at the end of 2016, for and challenges. the reasons stated above. The Bank’s policy on liquidity management, as formulated by the Assets and Liabilities Management Committee, is to secure adequate funding sources to facilitate loan growth at acceptable costs. The Bank currently maintains a daily liquidity ratio of 20% or higher as measured by total liquid assets (at a bank-only level) to total deposits. If the ratio falls below 20%, a corrective action will be immediately taken.

080-160 (4C) NEW_M5.indd 152 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

III. Statutory Capital

Pursuant to Basel III guidelines, the Bank of Thailand (BOT) maintain higher minimum Common Equity Tier 1 capital to requires all Thai commercial banks to hold a capital conservation provide additional stability and resilience to banks with D-SIBs buffer from January 1, 2016 onward. This additional capital status. This 1% Higher Loss Absorbency requirement applied requirement is to be phased in gradually to the Common to D-SIBs will be phased in starting at 0.5% in 2019 and Equity Tier 1 capital requirement at the rate of 0.625% p.a. increasing to 1.0% in 2020. until reaching the 2.5% target in 2019. The minimum regulatory capital requirements which include Furthermore, the Bank has recently been classified by the BOT, the capital conservation buffer and D-SIBs buffer (Higher Loss along with 4 other major Thai commercial banks, as Domestic Absorbency) are shown in the table below. Systemically Important Banks (D-SIBs) which are required to

Minimum regulatory capital requirement (%) 2016 2017 2018 2019 2020

Common Equity Tier 1 4.50% 4.50% 4.50% 4.50% 4.50% Tier 1 capital 6.00% 6.00% 6.00% 6.00% 6.00% Total capital 8.50% 8.50% 8.50% 8.50% 8.50% 153 Additional buffers

Capital Conservation Buffer 0.625% 1.25% 1.875% 2.50% 2.50% D-SIB Buffer - - - 0.50% 1.00%

Common Equity Tier 1 5.125% 5.75% 6.375% 7.50% 8.00% Tier 1 capital 6.625% 7.25% 7.875% 9.00% 9.50% Total capital 9.125% 9.75% 10.375% 11.50% 12.00%

The Bank has formulated a long-term capital management provisions will enable the Bank to withstand any adverse plan to accommodate both current and upcoming regulatory shocks, be it Bank-specific or economy-wide. Also, its strong changes well in advance. The Bank believes that its strong capital position will facilitate the Bank to pursue any future capital position, which is currently above the minimum growth opportunities. regulatory requirement, together with high loan loss

080-160 (4C) NEW_M5.indd 153 12/3/61 16:29 ANNUAL REPORT 2017

The Bank’s total capital ratios under Basel III at the end of 2017 are shown in the table below.

Statutory Capital (Consolidated Supervision) Dec 31, 17 Dec 31, 16

Common Equity Tier 1 / Tier 1* Baht million 321,939 294,566 % of RWA 15.6% 14.8%

Tier 2 capital Baht million 42,564 57,752 % of RWA 2.1% 2.9% Total capital Baht million 364,503 352,318 % of RWA 17.7% 17.7%

Risk-weighted assets Baht million 2,055,938 1,986,927

Statutory Capital (Bank only) Dec 31, 17 Dec 31, 16 154 Common Equity Tier 1 / Tier 1* Baht million 299,978 280,108 % of RWA 15.1% 14.5% Tier 2 capital Baht million 41,754 57,165 % of RWA 2.1% 2.9% Total capital Baht million 341,732 337,273 % of RWA 17.2% 17.4%

Risk-weighted assets Baht million 1,984,315 1,933,848

* CET1 under the Basel III framework was adopted in Thailand from January 1, 2013

080-160 (4C) NEW_M5.indd 154 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

IV. Non-Performing Assets

At the end of December 2017, gross NPLs on a consolidated in the SME segment and housing loans for self-employed basis stood at 2.83% of total loans, up from 2.67% of total borrowers, while NPLs from the corporate segment subsided. loans at the end of 2016. Higher NPLs were concentrated

Non-Performing Loans and Allowance (Consolidated) Dec 31, 17 Dec 31, 16

Non-Performing Loans (Gross NPLs) % of total loans 2.83% 2. 67% Baht million 65,560 57,593

Non-Performing Loans (Net NPLs) % of total loans 1.56% 1.38% Baht million 35,592 29,309

Allowance for doubtful accounts and debt restructuring 1 Baht million 89,990 77,357 155 Total allowance to NPLs 137.3% 134.3%

Non-Performing Loans (Gross NPLs) % of total loans 2.81% 2.65% (Bank only) Baht million 64,537 56,544

1 Excluding interbank and money market items.

Gross NPL Ratio & NPL Coverage Ratio (%) NPL by Segment and by Product (%)

NPL Coverage ratio (%) 2015 2016 2017

Corporate 4.0%* 2.3% 1.8% 134.3% 137.3% SME 4.6% 6.4% 7.6% 109.8%

Gross NPL (%) Retail 2.0% 2.1% 2.6%

2.89% 2.67% 2.83% Mortgage 2.1% 2.2% 3.1%

2015 2016 2017 Auto Loans 2.1% 1.8% 1.8%

*The increase is accounted mainly by SSI.

080-160 (4C) NEW_M5.indd 155 12/3/61 16:29 ANNUAL REPORT 2017

Provision +11.3 yoy (Consolidated, Baht billion)

29.71/ 25.1 22.5

2015 2016 2017

Credit Costs (bps) 165 119 129

1/ Includes substantial additional provisions for two large corporates (SSI and SSI-UK) of Baht 11.0 billion in 2015. SSI-UK was subsequently written-off in the third quarter of 2015.

Special mention loans stood at Baht 51.7 billion at the end of 2017, a significant increase of 15.9% from the end of 2016. The yoy increase was due mainly to one corporate customer in the mining industry and higher special mention loans from mortgage segment.

156 Unit: Baht million

Classified Loans and Allowance for Doubtful Accounts Dec 31, 17 Dec 31, 16 (Consolidated)

Loan and Allowance Loan and Allowance accrued for doubtful accrued for doubtful interest accounts interest accounts

Normal 1,920,725 19,964 1,840,936 19,184

Special mention 51,721 3,225 44,618 3,000

Substandard 17,161 7,961 20,698 9,654

Doubtful 13,429 4,163 9,707 3,153

Doubtful loss 35,024 18,206 27,217 15,641 Total 2,038,060 53,519 1,943,176 50,632

Allowance established in excess of BOT regulations 32,180 22,721

Total allowance 85,699 73,353

080-160 (4C) NEW_M5.indd 156 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

In 2017, new NPL formation was at 1.71%, down from 1.80% in 2016, which was mainly driven by lower new NPLs in the corporate and SME segments.

New NPLs by Segment and by Product (%)

1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 2016 2017

Total loans 0.41% 0.40% 0.50% 0.52% 0.41% 0.45% 0.38% 0.49% 1.80% 1.71%

Corporate 0.05% 0.00% 0.28% 0.18% 0.04% 0.03% 0.01% 0.10% 0.51% 0.17%

SME 0.86% 0.60% 0.70% 1.08% 0.60% 1.02% 0.54% 0.63% 3.23% 2.77%

Housing loans1/ 0.51% 0.65% 0.68% 0.61% 0.76% 0.70% 0.70% 0.96% 2.41% 3.07%

Auto loans2/ 0.41% 0.43% 0.40% 0.50% 0.41% 0.50% 0.50% 0.54% 1.72% 1.91%

New NPLs (Baht billion) 8.6 8.2 10.8 11.2 9.1 10.4 8.8 11.4 38.9 39.6

1/ Most of the growth in new NPLs in mortgages arose from customers who are self-employed, have a high level of leverage and a relatively high loan-to-value. The Bank had tightened its underwriting rules in these segments since early 2014. 157 2/ The new NPLs for auto loans in the table above do not include new NPLs where the auto was repossessed before the end of the month in which the customers turned NPL. The loss on sale of repossessed autos is then booked as an expense, as noted under the non-interest expenses section.

V. Sources and Uses of Funds

As of December 31, 2017, deposits accounted for 69.2% of from the issuance of debt instruments. As of December 31, SCB’s funding base. Other major sources of funds were: 12.0% 2017, the funds were deployed as follows: 67.3% for loans, from shareholders’ equity, 8.2% from liabilities under insurance 18.9% for investments in securities, 10.5% for interbank and contracts recorded by the Bank’s insurance subsidiary (SCB Life money markets lending, and 1.3% held in cash. Assurance PCL), 3.6% from interbank borrowings, and 2.6%

080-160 (4C) NEW_M5.indd 157 12/3/61 16:29 ANNUAL REPORT 2017

VI. Additional Financial Information

Unit: Baht million, %

(Consolidated) Dec 31, 17 Dec 31, 16 % yoy

Loans by Sector 2,034,732 1,939,048 4.9% Agricultural and mining 19,554 15,166 28.9% Manufacturing and commercial 612,733 605,350 1.2% Real estate and construction 149,123 132,755 12.3% Utilities and services 346,294 325,286 6.5% Housing loans* 542,564 521,869 4.0% Other loans 364,464 338,622 7.6%

Investment** 570,371 590,921 -3.5% Trading securities and securities measured at fair value through P/L 16,193 28,876 -43.9% Available-for-sale securities 432,064 438,473 -1.5% Held-to-maturity securities 120,671 122,166 -1.2% General investments 1,443 1,072 34.6%

158 Investment in associate 0 334 -100.0%

Debt securities in issue and borrowings 78,538 106,838 -26.5% Bonds 54,542 65,840 -17.2% Subordinated bonds 20,000 40,000 -50.0% Structured notes 3,815 914 317.3% Others 181 84 115.9%

NPL breakdown by status (Bank-only) Restructured and being serviced 66.2% 69.0% -2.8% Under negotiation for restructuring 5.8% 7.7% -1.9% In litigation 15.0% 11.2% 3.8% In foreclosure process 13.0% 12.0% 1.0%

Troubled debt restructured loans 35,723 40,490 -11.8% Restructured loans which are classified as NPL 8,595 9,651 -10.9% Restructured loans which are not classified as NPL 27,128 30,839 -12.0%

* Classified by sector/product and excludes retail loans where customers use their home as collateral. (These loans are classified under “Other loans” in accordance with regulatory guidelines). Elsewhere in this report, all housing loans are aggregated under mortgage loans and the balance of these loans at the end of December 31, 2017 and December 31, 2016, was Baht 630 billion and Baht 607 billion, respectively. ** 86.0% were investments in government and state-enterprise securities. The Bank held a high proportion of government securities to fulfill its goal of maintaining, at a bank-only level, a liquidity ratio (liquid assets/deposits) of at least 20%.

080-160 (4C) NEW_M5.indd 158 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

2017 2016

Yield on loans by segment Yield on loans 5.38% 5.58% Corporate 4.14% 4.17% SME 5.96% 6.36% Retail 6.34% 6.55% - Housing loans 5.24% 5.55% - Auto loans 6.36% 6.30%

NPL reduction methodology Repayments, auctions, and foreclosures 39.1% 34.1% Debt restructuring 5.8% 27.7% NPL sales* 28.9% 21.4%

Write off 26.1% 16.8% 159

* In 2017, the Bank solds NPLs of Baht 11.7 billion and Baht 10.7 billion in 2016.

080-160 (4C) NEW_M5.indd 159 12/3/61 16:29 ANNUAL REPORT 2017

VII. Credit Ratings

Credit Ratings of Siam Commercial Bank PCL December 31, 2017

Moody’s Investors Service Outlook Stable Bank deposits Baa1/P-2 Senior unsecured MTN (P) Baa1 Other short term (P) P-2

S&P Global Ratings Counterparty Credit Rating BBB+/A-2 ASEAN Regional Scale Rating axA+/axA-1 Outlook Stable Senior Unsecured (Long Term) BBB+

160 Senior Unsecured (Short Term) A-2

Fitch Ratings Foreign Currency Long Term Issuer Default Rating BBB+ Short Term Issuer Default Rating F2 Outlook Stable Senior Unsecured BBB+ Viability Rating bbb+

National Long Term Rating AA+(tha) Short Term Rating F1+(tha) Outlook Stable Subordinated Debenture AA(tha)

080-160 (4C) NEW_M5.indd 160 12/3/61 16:29 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

7.4 COMPARATIVE KEY FINANCIAL STATISTICS

5 - YEAR : KEY FINANCIAL STATISTICS 01 02 03 04 05 06 07 08 Financial08 Status (Consolidated) As of December 31, Unit: Baht billion

2013 2014 2015 2016 2017

Total Assets 2,534.2 2,699.7 2,774.3 2,913.0 3,024.0 - Loans 1,735.3 1,777.1 1,833.4 1,939.0 2,034.7 - Less allowance for doubtful accounts -60.3 -59.0 -64.8 -77.4 -90.0 - Net loans 1,675.0 1,718.1 1,768.6 1,861.7 1,944.7 - Investment-net 504.9 502.8 537.0 590.9 570.4 - Properties foreclosed 9.6 9.7 10.6 11.6 11.3

Total liabilities 2,286.2 2,413.4 2,466.6 2,578.7 2,660.3 - Deposits 1,822.9 1,895.3 1,890.7 2,026.3 2,092.5 - Borrowings 95.0 113.9 121.2 106.8 78.5 161

Total shareholders’ equity 248.0 286.3 307.7 334.3 363.8

Financial Results For the year ended December 31, Unit: Baht billion

2013 2014 2015 2016 2017

Interest income 120.7 123.4 122.5 122.4 125.1 Less interest expenses 47.7 42.3 39.6 34.0 32.8 Net interest income 73.0 81.1 82.8 88.4 92.3 Non-interest income 50.5 47.0 54.4 44.9 43.9 Total income 123.5 128.1 137.3 133.3 136.2 Less non-interest expense 47.3 48.1 48.8 51.6 57.7 Income before impairment loss of 76.2 80.0 88.5 81.7 78.6 loans and debt securities Less impairment loss of loans and debt securities 13.6 13.2 29.7 22.5 25.1 Less income tax and non-controlling interests 12.3 13.5 11.6 11.6 10.3 Net profit 50.2 53.3 47.2 47.6 43.2 (attributable to shareholders of the Bank)

161-162 NEW_M5.indd 161 12/3/61 15:11 ANNUAL REPORT 2017

Key Financial Ratios (Consolidated) Unit: Percent

2013 2014 2015 2016 2017

Profitability ratio Return on assets (ROA) 2.1 2.0 1.7 1.7 1.5 Return on equity (ROE) 21.8 20.1 15.9 14.8 12.4 Net interest margin (NIM) 3.2 3.3 3.2 3.3 3.2 Non-interest income to total income 40.9 36.7 39.7 33.7 32.2

Efficiency ratio Cost income ratio 38.3 37.5 35.6 38.7 42.3 Cost to assets 2.0 1.8 1.8 1.8 1.9

Financial ratio Equity to assets 9.7 10.6 11.1 11.5 12.0 Loans to deposits 95.2 93.8 97.0 95.7 97.2

Capital adequacy ratio 1/ Total capital to risk assets 15.4 17.0 17.3 17.7 17.7 Tier 1 capital to risk assets 12.0 13.7 14.1 14.8 15.6 162 Tier 2 capital to risk assets 3.4 3.3 3.2 2.9 2.1

Asset quality ratio Non-performing loans to total loans 2.14 2.11 2.89 2.67 2.83 Total allowance to non-performing loans 150.8 138.1 109.8 134.3 137.3 Total allowance to total loans 3.5 3.3 3.5 4.0 4.4 Accrued interest to total loans 0.2 0.2 0.2 0.2 0.2

Share Information 2/

2013 2014 2015 2016 2017

Earnings per share - EPS (Baht) 14.78 15.69 13.88 14.01 12.69 Book value per share (Baht) 72.45 83.94 90.45 98.28 106.93 Dividend per share 3/ (Baht) 5.25 6.00 5.50 5.50 5.50 Market capitalization (Billion Baht) 487.8 618.6 406.2 518.3 509.9 Number of shares (Million) 3,399 3,399 3,399 3,399 3,399

1/ 2013-2016 figures are disclosed under Basel III framework. 2/ The Bank’s share includes ordinary shares and preferred shares. 3/ Dividend per share in 2017 as proposed to the Annual General Meeting of Shareholders in April 2018. (Interim dividend Baht 1.50 per share)

161-162 NEW_M5.indd 162 12/3/61 15:11 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

7.5 INDEPENDENT AUDITOR’S REPORT

To the Shareholders of The Siam Commercial Bank 01 02 03 04 05 06 07 08 Public08 Company Limited

Opinion Basis for Opinion

I have audited the consolidated and the Bank’s financial I conducted my audit in accordance with Thai Standards on statements of The Siam Commercial Bank Public Company Auditing (TSAs). My responsibilities under those standards are Limited and its subsidiaries (the “Group”) and of The Siam further described in the Auditor’s Responsibilities for the Commercial Bank Public Company Limited (the “Bank”), Audit of the Consolidated and the Bank’s Financial Statements respectively, which comprise the consolidated and the Bank’s section of my report. I am independent of the Group and the statements of fi nancial position as at 31 December 2017, Bank in accordance with the Code of Ethics for Professional the consolidated and the Bank’s statements of profi t or loss Accountants issued by the Federation of Accounting and other comprehensive income, changes in equity and Professions that is relevant to my audit of the consolidated and cash fl ows for the year then ended, and notes, comprising the Bank’s fi nancial statements, and I have fulfi lled my other a summary of significant accounting policies and other ethical responsibilities in accordance with these requirements. explanatory information. I believe that the audit evidence I have obtained is suffi cient 163 and appropriate to provide a basis for my opinion. In my opinion, the accompanying consolidated and the Bank’s fi nancial statements present fairly, in all material respects, the Key Audit Matters fi nancial position of the Group and the Bank, respectively, as Key audit matters are those matters that, in my professional at 31 December 2017 and their fi nancial performance and judgment, were of most significance in my audit of the cash fl ows for the year then ended in accordance with Thai consolidated and the Bank’s fi nancial statements of the current Financial Reporting Standards (TFRSs). period. These matters were addressed in the context of my audit of the consolidated and the Bank’s fi nancial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters.

163-169 NEW_M5.indd 163 12/3/61 15:13 ANNUAL REPORT 2017

Allowance for doubtful accounts on loans to customers

For disclosures related to credit risk of loans to customers and allowance for doubtful accounts, refer to notes 3.5, 4.1 and 11. The key audit matter How the matter was addressed in the audit

The allowance for doubtful accounts on loans to customers In planning my audit procedures I performed a risk assessment is considered a Key Audit Matter as it requires the application by considering internal and external factors which could affect of judgments and use of subjective assumptions over both the performance of individual customers, industry sectors, the timing of recognition, and the estimation of the amount customer segments, or which could influence the judgments of the allowance of certain loans and portfolios of loans to and estimates. customers. My audit procedures included testing the design and operating As at 31 December 2017, loans to customers recorded in the effectiveness of selected controls surrounding the credit and consolidated and the Bank’s financial statements amounted impairment process. to Baht 2,060 billion and Baht 2,046 billion (approximately 164 I performed credit review procedures for a sample of loans, 68.1% and 75.1% of total assets), against which allowances including a detailed review of the individual credit profile and for doubtful accounts of Baht 86 billion and Baht 85 billion, other relevant information, from which I formed my own respectively, were provided. independent assessment. My sample included individually large Management has established a control framework over the exposures, loans subject to restructuring and reschedule, as estimation process of the allowance for doubtful accounts well as a selection of loans identified in my risk assessment. which includes governance procedures, management review I tested model parameter assumptions and methodologies, and approval, and controls to ensure the integrity of data where appropriate, with involvement of my own credit risk used in the process. The allowance for doubtful accounts is specialists, and including reconciliation of data to underlying in accordance with the Bank of Thailand’s guidelines which systems and back-testing results. require the Bank to perform both quantitative and qualitative reviews of loans as an ongoing process. Within this framework:

• Individual assessments are made by management of loan grading and classification. Collateral valuation estimates are used in determining allowance for Non-Performing Loans.

• The allowances are assessed on a portfolio basis for certain portfolios with similar risk characteristics. Expected Loss Model methodologies incorporating assumptions such as customer behavior and repayment abilities are selected, approved and applied to portfolios of loans of a similar nature and risk profile.

163-169 NEW_M5.indd 164 12/3/61 15:13 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Valuation of financial instruments in the statement of financial position

For disclosures related to financial instruments and fair values, refer to notes 3.3, 3.25, 3.26, 4, 5, 8 and 9. The key audit matter How the matter was addressed in the audit

The valuation of financial instruments is considered a Key In planning my audit procedures I performed a risk assessment Audit Matter due to the degree of complexity involved in by considering the factors which could affect the fair value valuing certain level 2 instruments and the significance of of financial instruments, both in terms of the inputs used for judgment and estimates involved. valuation and the appropriateness of valuation techniques applied. As at 31 December 2017, financial assets measured at fair value in the consolidated and the Bank’s financial statements For a sample of financial instruments, I checked that pricing amounted to Baht 491 billion and Baht 331 billion, respectively. inputs used were externally sourced and were correctly input Financial liabilities measured at fair value in the consolidated into pricing models, including an assessment of the liquidity of and the Bank’s financial statements amounted to Baht 45 prices, where applicable. I used my own valuation specialists billion and Baht 44 billion, respectively. As at 31 December to assess that the models were appropriate and they valued 165 2017, financial assets measured at fair value classified as level a selection of the Group and the Bank’s debt securities 2 in the consolidated and the Bank’s financial statements and derivative positions independently and compared their amounted to Baht 462 billion and Baht 322 billion, valuation to the Group and the Bank’s valuation. respectively. Financial liabilities measured at fair value classified as level 2 in the consolidated and the Bank’s financial statements amounted to Baht 44 billion and Baht 44 billion, respectively.

There is a risk that financial instruments classified as “level 2” in the fair value hierarchy, may be mispriced in the statement of financial position because they are not based on objective external prices or, where these are not easily observable, the best estimate of what they may be.

163-169 NEW_M5.indd 165 12/3/61 15:13 ANNUAL REPORT 2017

Valuation of Life Insurance Policy Reserves

For disclosures related to Life Insurance Policy Reserves, refer to notes 3.28, 4.6 and 23.

The key audit matter How the matter was addressed in the audit

The valuation of life insurance policy reserves is considered In planning my audit procedures I performed a risk assessment a Key Audit Matter as it involves significant complex and by considering factors which could affect the major valuation subjective judgments about future events, applying actuarial assumptions and controls framework over data input. These methodologies and assumptions, which could materially affect major assumptions include economic assumptions such as the amount of the recorded liability and expense. investment returns and discount rates and non-economic assumptions such as mortality and persistency. As at 31 December 2017, liabilities under insurance contracts recorded by the subsidiary in the consolidated financial With my audit procedures the assistance of my actuarial statements amounted to Baht 248 billion, mainly comprising specialists, included assessments of the methodology and long-term technical reserves (approximately 99.6% of assumptions used in calculating the reserves and testing liabilities under insurance contracts). the significant inputs included evaluating the design, 166 implementation and operating effectiveness of selected controls over the actuarial assumptions and the valuation process.

I considered, in particular, the validity of management’s liability adequacy testing, including assessing the reasonableness of the projected cash flows, discount rate and of the assumptions adopted in the context of company experience, specific product features and industry practice. The discount rates adopted by management are consistent with market practice.

163-169 NEW_M5.indd 166 12/3/61 15:13 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Other Information management either intends to liquidate the Group and the Bank or to cease operations, or has no realistic alternative Management is responsible for the other information. The but to do so. other information comprises the information included in the annual report, but does not include the consolidated and the Those charged with governance are responsible for overseeing Bank’s financial statements and my auditor’s report thereon. the Group’s and the Bank’s financial reporting process. The annual report is expected to be made available to me Auditor’s Responsibilities for the Audit of the after the date of this auditor’s report. Consolidated and the Bank’s Financial Statements My opinion on the consolidated and Bank’s financial My objectives are to obtain reasonable assurance about statements does not cover the other information and I will whether the consolidated and the Bank’s financial statements not express any form of assurance conclusion thereon. as a whole are free from material misstatement, whether In connection with my audit of the consolidated and Bank’s due to fraud or error, and to issue an auditor’s report that financial statements, my responsibility is to read the other includes my opinion. Reasonable assurance is a high level of information identified above when it becomes available assurance, but is not a guarantee that an audit conducted and, in doing so, consider whether the other information in accordance with TSAs will always detect a material 167 is materially inconsistent with the consolidated and Bank’s misstatement when it exists. Misstatements can arise from financial statements or my knowledge obtained in the audit, fraud or error and are considered material if, individually or otherwise appears to be materially misstated. or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis Responsibilities of Management and Those Charged of these consolidated and the Bank’s financial statements. with Governance for the Consolidated and the Bank’s Financial Statements As part of an audit in accordance with TSAs, I exercise professional judgment and maintain professional skepticism Management is responsible for the preparation and fair throughout the audit. I also: presentation of the consolidated and the Bank’s financial statements in accordance with TFRSs, and for such internal • Identify and assess the risks of material misstatement control as management determines is necessary to enable of the consolidated and the Bank’s financial statements, the preparation of consolidated and the Bank’s financial whether due to fraud or error, design and perform audit statements that are free from material misstatement, whether procedures responsive to those risks, and obtain audit due to fraud or error. evidence that is sufficient and appropriate to provide a basis for my opinion. The risk of not detecting a material In preparing the consolidated and the Bank’s financial misstatement resulting from fraud is higher than for one statements, management is responsible for assessing the resulting from error, as fraud may involve collusion, forgery, Group’s and the Bank’s ability to continue as a going concern, intentional omissions, misrepresentations, or the override disclosing, as applicable, matters related to going concern of internal control. and using the going concern basis of accounting unless

163-169 NEW_M5.indd 167 12/3/61 15:13 ANNUAL REPORT 2017

• Obtain an understanding of internal control relevant to I communicate with those charged with governance regarding, the audit in order to design audit procedures that are among other matters, the planned scope and timing of the appropriate in the circumstances, but not for the purpose audit and significant audit findings, including any significant of expressing an opinion on the effectiveness of the deficiencies in internal control that I identify during my audit. Group’s and the Bank’s internal control. I also provide those charged with governance with a statement • Evaluate the appropriateness of accounting policies used that I have complied with relevant ethical requirements and the reasonableness of accounting estimates and regarding independence, and to communicate with them related disclosures made by management. all relationships and other matters that may reasonably be thought to bear on my independence, and where applicable, • Conclude on the appropriateness of management’s use of related safeguards. the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty From the matters communicated with those charged with exists related to events or conditions that may cast governance, I determine those matters that were of most significant doubt on the Group’s and the Bank’s ability to significance in the audit of the consolidated and the Bank’s continue as a going concern. If I conclude that a material financial statements of the current period and are therefore 168 uncertainty exists, I am required to draw attention in the key audit matters. I describe these matters in my auditor’s my auditor’s report to the related disclosures in the report unless law or regulation precludes public disclosure consolidated and the Bank’s financial statements or, if about the matter or when, in extremely rare circumstances, such disclosures are inadequate, to modify my opinion. I determine that a matter should not be communicated in My conclusions are based on the audit evidence obtained my report because the adverse consequences of doing so up to the date of my auditor’s report. However, future would reasonably be expected to outweigh the public interest events or conditions may cause the Group and the Bank benefits of such communication. to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and the Bank’s financial statements, including the disclosures, and whether the consolidated and the Bank’s financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (Winid Silamongkol) • Obtain sufficient appropriate audit evidence regarding Certified Public Accountant the financial information of the entities or business Registration No. 3378 activities within the Group to express an opinion on the consolidated financial statements. I am responsible for KPMG Phoomchai Audit Ltd. the direction, supervision and performance of the group Bangkok audit. I remain solely responsible for my audit opinion. 22 February 2018

163-169 NEW_M5.indd 168 12/3/61 15:13 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

FINANCIAL STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS

169

163-169 NEW_M5.indd 169 12/3/61 15:13 ANNUAL REPORT 2017

7.6 STATEMENT OF FINANCIAL POSITION

(in thousand Baht) 01 02 03 04 05 06 07 08 08 Consolidated The Bank 31 December 31 December Assets Note 2017 2016 2017 2016

Cash 40,797,176 40,488,512 40,591,037 40,317,033 Interbank and money market items, net 7 316,733,080 257,256,079 303,476,880 243,901,504 Derivatives assets 8 43,499,427 58,590,670 46,035,173 59,634,746 Investments, net 9 570,370,844 590,586,901 299,032,913 363,076,332 Investments in subsidiaries and associate, net 10 - 333,702 18,016,700 16,741,514 Loans to customers and accrued interest receivables, net 11 Loans to customers 2,059,948,448 1,962,604,955 2,046,282,647 1,950,822,291 Accrued interest receivables 3,328,131 4,128,530 2,963,859 3,504,906 170 Total loans to customers and accrued interest receivables 2,063,276,579 1,966,733,485 2,049,246,506 1,954,327,197 Less deferred revenue (25,216,416) (23,557,162) (25,216,417) (23,557,162) Less allowance for doubtful accounts 11.9 (85,699,301) (73,353,575) (84,936,081) (72,624,446) Less revaluation allowance for debt restructuring 12 (4,291,141) (4,003,522) (4,291,141) (4,003,522) Total loans to customers and accrued interest receivables, net 1,948,069,721 1,865,819,226 1,934,802,867 1,854,142,067 Properties for sale, net 14 11,283,644 11,604,427 11,280,102 11,599,777 Premises and equipment, net 15 44,164,383 40,887,724 42,890,983 39,647,293 Goodwill and other intangible assets, net 16 18,107,161 13,514,334 8,778,161 4,264,935 Assets pending transfer 17 2,234,515 2,370,538 2,300,059 2,442,140 Deferred tax assets 42 110,753 410,314 25,740 7,758 Other assets, net 18 28,661,317 31,125,417 18,401,385 25,631,231 Total assets 3,024,032,021 2,912,987,844 2,725,632,000 2,661,406,330

The accompanying notes are an integral part of these fi nancial statements.

170-304 NEW_M5.indd 170 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

STATEMENT OF FINANCIAL POSITION The Siam Commercial Bank Public Company Limited and its Subsidiaries

(in thousand Baht) Consolidated The Bank 31 December 31 December Liabilities and shareholders’ equity Note 2017 2016 2017 2016

Liabilities Deposits 19 2,092,457,200 2,026,272,115 2,087,890,289 2,021,453,602 Interbank and money market items 20 108,573,192 100,953,159 110,911,960 103,778,925 Liability payable on demand 23,670,751 10,526,319 23,670,230 10,521,749 Liabilities to deliver security 3.11 59,900 50,594 - - Derivatives liabilities 8 44,984,107 54,192,365 44,620,824 54,138,466 Debt issued and borrowings 21 78,538,067 106,837,890 75,379,761 106,652,606 Provisions 22 7,729,706 7,461,771 7,340,382 7,116,836 Liabilities under insurance contracts 23 248,244,534 216,994,447 - - Liabilities pending transfer 24 14,615,892 13,471,154 14,488,352 13,428,370 171 Deferred tax liabilities 42 3,589,507 2,327,820 2,559,950 2,186,016 Other liabilities 25 37,806,171 39,601,988 29,802,716 32,935,499 Total liabilities 2,660,269,027 2,578,689,622 2,396,664,464 2,352,212,069

The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 171 12/3/61 15:17 ANNUAL REPORT 2017

STATEMENT OF FINANCIAL POSITION The Siam Commercial Bank Public Company Limited and its Subsidiaries

(in thousand Baht) Consolidated The Bank 31 December 31 December Liabilities and shareholders’ equity Note 2017 2016 2017 2016

Shareholders’ equity

Share capital 26 Authorised share capital 3,583,825,728 preferred shares of Baht 10 each 35,838,257 35,838,257 35,838,257 35,838,257

3,416,174,272 common shares of Baht 10 each 34,161,743 34,161,743 34,161,743 34,161,743

Issued and paid-up share capital 3,784,972 preferred shares 172 of Baht 10 each 37,850 38,903 37,850 38,903 3,395,407,226 common shares of Baht 10 each 33,954,072 33,953,019 33,954,072 33,953,019 Premium on share capital Premium on preferred shares 14,802 15,213 14,802 15,213 Premium on common shares 11,109,389 11,108,978 11,109,389 11,108,978 Other reserves 27 19,985,092 15,342,084 18,654,960 18,312,436 Retained earnings Appropriated Legal reserve 27 7,000,000 7,000,000 7,000,000 7,000,000 Unappropriated 291,362,368 266,630,575 258,196,463 238,765,712 Total owners of the company 363,463,573 334,088,772 328,967,536 309,194,261 Non-controlling interests 299,421 209,450 - - Total shareholders’ equity 363,762,994 334,298,222 328,967,536 309,194,261 Total liabilities and shareholders’ equity 3,024,032,021 2,912,987,844 2,725,632,000 2,661,406,330

(Mr. Arthid Nanthawithaya) President and Chief Executive Officer

The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 172 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME The Siam Commercial Bank Public Company Limited and its Subsidiaries

(in thousand Baht) Consolidated The Bank For the year ended 31 December For the year ended 31 December Note 2017 2016 2017 2016

Interest income 36 125,113,063 122,443,063 115,630,594 114,144,175 Interest expenses 37 32,803,548 33,993,718 32,766,978 33,973,975 Net interest income 92,309,515 88,449,345 82,863,616 80,170,200 Fees and service income 38 36,854,858 34,379,242 37,424,662 36,608,736 Fees and service expenses 38 6,530,982 5,965,037 5,337,478 4,912,879 Net fees and service income 38 30,323,876 28,414,205 32,087,184 31,695,857 Gains on trading 39 7,089,951 6,713,833 6,888,659 6,547,319 Gains on investments 40 1,610,763 2,534,734 704,314 1,278,831 Share of loss from investment for using equity method 10.2 (8,949) (10,513) - - 173 Dividend income 1,032,097 1,119,392 3,349,891 3,535,324 Net earned insurance premiums 49,231,848 52,314,254 - - Other operating income 989,649 433,225 681,923 93,614 Total operating income 182,578,750 179,968,475 126,575,587 123,321,145 Net insurance claims 46,366,273 46,634,372 - - Net operating income 136,212,477 133,334,103 126,575,587 123,321,145 Other operating expenses Employee’s expenses 27,488,330 24,597,294 24,207,823 21,571,637 Directors’ remuneration 98,940 96,707 91,635 89,972 Premises and equipment expenses 11,553,836 10,823,314 10,744,254 10,045,782 Taxes and duties 4,417,007 4,261,769 4,050,500 3,996,871 Others 14,091,949 11,864,578 16,349,431 13,603,800 Total operating expenses 57,650,062 51,643,662 55,443,643 49,308,062 Impairment loss on loans and debt securities 41 25,066,653 22,527,984 25,030,000 22,530,000 Profit from operating before income tax expense 53,495,762 59,162,457 46,101,944 51,483,083 Income tax expenses 42 10,291,148 11,493,030 8,247,976 9,318,038 Net profit 43,204,614 47,669,427 37,853,968 42,165,045

The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 173 12/3/61 15:17 ANNUAL REPORT 2017

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME The Siam Commercial Bank Public Company Limited and its Subsidiaries

(in thousand Baht) Consolidated The Bank For the year ended 31 December For the year ended 31 December Note 2017 2016 2017 2016

Other comprehensive income (loss) Items that will be reclassified subsequently to profit or loss Gains (losses) on remeasuring available-for-sale investments 6,079,641 (2,641,408) 717,378 (121,585) Losses arising from translating the financial statements of a foreign operation (204,089) (23,420) - - Share of other comprehensive income (loss) of associate (using equity method) 72 (22,820) - - 174 Changes in hedge reserve 370,849 (136,252) 51,202 (51,212) Income tax relating to components of other comprehensive (loss) income will be reclassified subsequently to profit or loss 42 (1,290,097) 558,327 (153,716) 34,559 4,956,376 (2,265,573) 614,864 (138,238)

The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 174 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME The Siam Commercial Bank Public Company Limited and its Subsidiaries

(in thousand Baht) Consolidated The Bank For the year ended 31 December For the year ended 31 December Note 2017 2016 2017 2016

Items that will not be reclassified subsequently to profit or loss Changes in revaluation surplus - (53,058) - (53,058) Income tax relating to components of other comprehensive income will not be reclassified subsequently to profit or loss 42 - 10,612 - 10,612 - (42,446) - (42,446)

Total other comprehensive income 175 (loss), net of income tax 4,956,376 (2,308,019) 614,864 (180,684) Total comprehensive income 48,160,990 45,361,408 38,468,832 41,984,361

Net profit attributable to: Owners of the company 43,151,904 47,612,227 37,853,968 42,165,045 Non-controlling interests 52,710 57,200 - -

Total comprehensive income attributable to: Owners of the company 48,070,604 45,321,598 38,468,832 41,984,361 Non-controlling interests 90,386 39,810 - -

Earnings per share of the parent company Basic earnings per share (in Baht) 43 12.69 14.01 11.14 12.40

(Mr. Arthid Nanthawithaya) President and Chief Executive Officer

The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 175 12/3/61 15:17 ANNUAL REPORT 2017 - - - (661) Total equity 4,956,376

43,204,614 48,160,990 (18,695,557) shareholders’ 363,762,994 334,298,222

- -

(in thousand Baht) thousand (in (415) 37,676 52,710 90,386 Non-

299,421 209,450 interests controlling

- - - -

(246)

of the of

4,918,700 company 43,151,904 48,070,604 (18,695,557)

Total owners Total 363,463,573 334,088,772

------

275,446

43,151,904 43,151,904 291,362,368 266,630,575 (18,695,557) Unappropriated

------

Retained earningsRetained

Legal

reserve

7,000,000 7,000,000

- -

- - - -

(246)

(275,446)

4,918,700 4,918,700 reserves 19,985,092 15,342,084 Total other Total

------

(289) Others

(2,364,496) (2,364,207)

------

- - - -

surplus (275,446) revaluation Changes in Changes

16,329,890 16,605,336

Consolidated 3

------hedge reserve 40,608 294,561 335,172 294,561 Changes in Changes

176 Other reservesOther

------72 72 (72) method) of associate of (using equity (using (loss) income

Share of other of Share comprehensive comprehensive

------(204,089) operation (330,032) (204,089) statements of a foreign foreign a of (125,943)

the financial Losses arisingLosses from translatingfrom

------

for-sale Gains on Gains available- 4,828,156 4,828,156 1,186,362 investments remeasuring 6,014,558

------

411

Common

11,108,978

11,109,389

------share capital share Premium on

(411)

shares 15,213 14,802 Preferred

------

1,053

Common

33,954,072 33,953,019

------Issued and shares (1,053) paid-up share capital share paid-up 37,850 38,903 Preferred

2017

28 Note

2017

December

December 1 January1 2017 preferredto shares common shares non-controlling without interests in control change a income (loss) (loss) income 31

ended Year at Balance paid Dividend Conversion of of Acquisitions Net profit at Balance STATEMENT OF CHANGES IN EQUITY IN CHANGES OF STATEMENT Subsidiariesits and Limited Company Public Bank Commercial Siam The Other comprehensive comprehensive Total earningsretained to Transfer The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 176 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED - - - (51,780) Total equity

(2,308,019) 47,669,427 45,361,408 (18,704,440) shareholders’ 307,693,034 334,298,222

- -

(in thousand Baht) thousand (in

(8,883) 57,200 39,810 Non- (17,390) (51,780) 230,303 209,450 interests controlling

- - - -

of the of company (2,290,629) 47,612,227 45,321,598 (18,695,557) Total owners Total 307,462,731 334,088,772

- - -

293,366

47,612,227 47,612,227 (18,695,557) 237,420,539 266,630,575 Unappropriated

------

Retained earningsRetained

Legal

reserve 7,000,000 7,000,000

- - - -

(293,366)

reserves (2,290,629) (2,290,629) 17,926,079 Total other Total 15,342,084

------

Others

(2,364,207) (2,364,207)

- -

------

(42,446) (42,446) surplus (293,366) revaluation Changes in Changes

16,941,148 16,605,336

Consolidated

------hedge 40,608 reserve Changes in Changes 149,046 (108,438) (108,438)

177 Other reservesOther

------(72) (22,820) (22,820) 22,748 method) of associate of (using equity (using income (loss)

Share of other of Share comprehensive comprehensive

------(23,420) (23,420) operation (125,943) statements of a foreign foreign a of (102,523)

the financial Losses arisingLosses from translatingfrom

- -

------

Gains

for-sale available- 3,279,867 1,186,362 (losses) on (losses) investments (2,093,505) remeasuring (2,093,505)

------

3,179 shares

Common 11,105,799 11,108,978

------share capital share Premium on

shares 18,392 15,213 (3,179) Preferred

------

8,130

Common

33,944,889 33,953,019

------Issued and shares paid-up share capital share paid-up 47,033 Preferred (8,130)

38,903

Note

1 January1 2016 preferredshares common shares to non-controlling with interests in control change a income (loss) 31 December 2016 December 31 STATEMENT OF CHANGES IN EQUITY IN CHANGES OF STATEMENT Subsidiariesits and Limited Company Public Bank Commercial Siam The

2016 December 31 ended Year at Balance paid Dividend Conversion of of Acquisitions Net profit loss Other comprehensive comprehensive Total earningsretained to Transfer The accompanying notes are an integral part of these financial statements. Balance at Balance

170-304 NEW_M5.indd 177 12/3/61 15:17 ANNUAL REPORT 2017 - - 614,864 614,864 Total equity 38,468,832 (18,695,557) 37,853,968 37,853,968 309,194,261 328,967,536 328,967,536

shareholders’

(in thousand Baht) thousand (in

- - -

272,340 37,853,968 37,853,968 238,765,712 258,196,463 (18,695,557)

Unappropriated

------

Retained earningsRetained Legal reserve 7,000,000 7,000,000

------

Total other 614,864 614,864 (272,340) reserves 18,312,436 18,654,960

------

(272,340) surplus 16,027,739 15,755,399 revaluation Changes in Changes

------(8) Other reservesOther 40,962 (40,970) 40,962 The Bank The

Changes in Changes hedge reservehedge

------

178 573,902 573,902 2,325,667 2,899,569 for-sale

Gains on Gains available- investments remeasuring

------

411

shares Common 11,108,978 11,109,389

------Premium on Premium share capital share

(411) 15,213 shares 14,802 Preferred

------

1,053

shares Common 33,953,019 33,954,072

------Issued and Issued

38,903 shares (1,053) paid-up share capital share paid-up 37,850 Preferred

28 Note

1 January1 2017 2017 December 31 shares to common shares common to shares

2017 December 31 ended Year at Balance STATEMENT OF CHANGES IN EQUITY IN CHANGES OF STATEMENT Subsidiariesits and Limited Company Public Bank Commercial Siam The paid Dividend Conversionpreferred of profit Net income comprehensive Other income comprehensive Total earningsretained to Transfer at Balance The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 178 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED - - (180,684) Total equity 42,165,045 41,984,361 285,905,457 285,905,457 309,194,261 309,194,261

(18,695,557) shareholders’

(in thousand Baht) thousand (in

- - -

290,260 42,165,045 42,165,045 215,005,964 238,765,712 (18,695,557)

Unappropriated

- - - -

------

Retained earningsRetained Legal reserve 7,000,000 7,000,000

------

Total other (180,684) (290,260) (180,684) reserves 18,783,380 18,312,436

------

(42,446) (42,446) (290,260) surplus 16,360,445 16,027,739 revaluation Changes in Changes

------Other reservesOther (40,970) (40,970) (40,970) The Bank The

Changes in Changes hedge reservehedge

------

179 (97,268) (97,268) 2,422,935 for-sale

2,325,667 available- investments Gains (losses) Gains

on remeasuring

------

3,179 (Mr. Arthid Nanthawithaya) (Mr.

shares Common 11,105,799 11,108,978 President and Chief Executive Officer Executive Chief and President

------Premium on Premium share capital share

18,392 (3,179) shares 15,213 Preferred

------

8,130

shares Common 33,944,889 33,953,019

------Issued and Issued

47,033 shares (8,130) paid-up share capital share paid-up 38,903 Preferred

Note

31 December 2016 December 31 1 January1 2016 shares common to shares income (loss)

2016 December 31 ended Year at Balance paid Dividend Conversionpreferred of profit Net loss comprehensive Other comprehensive Total earningsretained to Transfer at Balance

STATEMENT OF CHANGES IN EQUITY IN CHANGES OF STATEMENT Subsidiariesits and Limited Company Public Bank Commercial Siam The The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 179 12/3/61 15:17 ANNUAL REPORT 2017

STATEMENT OF CASH FLOWS The Siam Commercial Bank Public Company Limited and its Subsidiaries

(in thousand Baht) Consolidated The Bank For the year ended 31 December For the year ended 31 December 2017 2016 2017 2016

Cash flows from operating activities Profit from operating before income tax expense 53,495,762 59,162,457 46,101,944 51,483,083 Adjustments to reconcile profit from operating before income tax expense to cash receipts (payments) from operating activities Depreciation and amortisation 3,271,861 2,796,878 3,103,600 2,609,470 Impairment loss on loans and debt securities 27,497,266 24,694,401 27,460,613 24,696,417 Losses on impairment of properties for sale 12,411 57,877 11,304 57,877 Gains on sales of premises and equipment (24,479) (136,790) (21,405) (130,154) Losses (gains) on trading 3,084,349 (4,588,393) 2,685,110 (5,009,286) 180 Gains on investments (1,610,763) (2,534,734) (704,314) (1,278,831) Share of loss from investment for using equity method 8,949 10,513 - - 85,735,356 79,462,209 78,636,852 72,428,576 Net interest income (92,309,515) (88,449,345) (82,863,616) (80,170,200) Dividend income (1,032,097) (1,119,392) (3,349,891) (3,535,324) Proceeds from interest 126,765,200 123,854,189 116,837,369 115,294,836 Interest paid (33,262,642) (35,631,228) (33,211,538) (35,617,882) Proceeds from dividend 1,028,378 1,114,134 2,303,359 3,535,324 Income tax paid (10,793,147) (12,094,448) (8,604,425) (9,878,484) Profit from operating before changes in operating assets and liabilities 76,131,533 67,136,119 69,748,110 62,056,846

(Increase) decrease in operating assets Interbank and money market items (59,424,924) 3,722,055 (59,585,388) 2,605,860 Derivatives assets 7,527,791 2,845,244 7,061,739 4,781,836 Investment in securities for trading 14,543,299 (9,125,622) 19,682,058 (8,198,192) Loans to customers (118,710,261) (127,196,979) (116,824,562) (126,653,978) Properties for sale 8,512,888 8,310,458 8,512,888 8,310,553 Other assets 2,984,061 5,712,177 7,282,392 8,599,920

The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 180 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

STATEMENT OF CASH FLOWS The Siam Commercial Bank Public Company Limited and its Subsidiaries

(in thousand Baht) Consolidated The Bank For the year ended 31 December For the year ended 31 December 2017 2016 2017 2016

Cash flows from operating activities Increase (decrease) in operating liabilities Deposits 66,185,085 135,543,193 66,436,687 136,549,924 Interbank and money market items 7,620,033 (41,983,904) 7,133,035 (41,938,947) Liability payable on demand 13,144,432 2,042,112 13,148,481 2,041,263 Liabilities to deliver security 9,306 32,254 - - Derivatives liabilities (8,005,015) (5,584,736) (9,742,892) (6,123,900) Short-term debt issued and borrowings (36,174,269) (13,617,480) (39,147,291) (14,024,726) Liabilities under insurance contracts 31,250,087 32,215,481 - - Other liabilities 359,863 11,177,143 (1,017,702) 10,857,321 181 Net cash from (used in) operating activities 5,953,909 71,227,515 (27,312,445) 38,863,780

Cash flows from investing activities

Acquisition of available-for-sale securities (516,878,010) (571,471,012) (376,873,023) (454,907,621) Proceeds from sales of available-for-sale securities 528,910,230 515,870,226 421,918,513 433,785,212 Acquisition of held-to-maturity securities (669,600) (9,231,641) (669,600) (710,400) Proceeds from redemption of held-to-maturity securities 1,707,990 19,679,259 1,900,898 1,453,201 Acquisition of general securities (243,070) (801,555) (234,570) (801,555) Proceeds from sales of general securities 30,208 13,791 30,208 13,791 Acquisition of investments in subsidiaries and/or associate - - (457,553) (421,098) Proceeds from decrease in capital of subsidiary - - - 8,442,471 Acquisition of premises and equipment (5,768,414) (3,265,479) (5,644,363) (3,210,640) Proceeds from sales of premises and equipment 83,694 277,106 78,654 272,002 Acquisition of intangible assets (5,367,363) (2,061,133) (5,216,555) (2,503,866) Net cash from (used in) investing activities 1,805,665 (50,990,438) 34,832,609 (18,588,503)

The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 181 12/3/61 15:17 ANNUAL REPORT 2017

STATEMENT OF CASH FLOWS The Siam Commercial Bank Public Company Limited and its Subsidiaries

(in thousand Baht) Consolidated The Bank For the year ended 31 December For the year ended 31 December 2017 2016 2017 2016

Cash flows from financing activities Repayment from long-term debt issued (20,000,000) - (20,000,000) - Proceeds from long-term debt issued 31,296,938 - 31,296,938 - Proceeds from long-term borrowings 152,459 - 152,459 - Dividend paid to equity holders of the Bank (18,695,557) (18,695,557) (18,695,557) (18,695,557) Dividend paid to non-controlling interests - (8,883) - - Payment of change in ownweship interest in subsidiaries without a change in control (661) - - - Net cash used in financing activities (7,246,821) (18,704,440) (7,246,160) (18,695,557) Losses arising from translating the financial 182 statements of a foreign operation (204,089) (23,420) - -

Net increase in cash 308,664 1,509,217 274,004 1,579,720 Cash at 1 January 40,488,512 38,979,295 40,317,033 38,737,313 Cash at 31 December 40,797,176 40,488,512 40,591,037 40,317,033

Supplementary disclosures of cash flow information Significant non-cash items were as follows: Gains (losses) on remeasuring available-for-sale investments 6,079,641 (2,641,408) 717,378 (121,585) Losses arising from translating the financial statements of a foreign operation (204,089) (23,420) - - Share of other comprehensive income (loss) of associate (using equity method) 72 (22,820) - - Changes in hedge reserve 370,849 (136,252) 51,202 (51,212) Changes in revaluation surplus - (53,058) - (53,058) Properties for sale from loan payment 8,204,517 9,414,680 8,204,517 9,414,680

(Mr. Arthid Nanthawithaya) President and Chief Executive Officer

The accompanying notes are an integral part of these financial statements.

170-304 NEW_M5.indd 182 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

These notes form an integral part of the financial statements.

The financial statements issued for Thai statutory and regulatory reporting purposes are prepared in the Thai language. These English language financial statements have been prepared from and are consistent with the Thai language statutory financial statements, and both the English and Thai language financial statements were approved and authorised for issue by the Board of Directors on 22 February 2018.

1 General information

The Siam Commercial Bank Public Company Limited, the “Bank”, is incorporated in Thailand and has its registered office at 9 Ratchadapisek Road, Jatujak, Bangkok.

The Bank was established by Royal Charter on 30 January 1906 and was listed on the Stock Exchange of Thailand on 6 February 1976.

The principal business of the Bank is the provision of financial products and services through its Head Office and branch network in Thailand, its branches in Singapore, Hong Kong, Laos, Vietnam, and Cayman Islands and its subsidiaries in Thailand and Cambodia. The Bank also has a sizeable investment in its life insurance subsidiary. Details of the Bank’s subsidiaries 183 as at 31 December 2017 and 2016 are given in note 10.

2 Basis of preparation of the financial statements

(a) Statement of compliance

The financial statements are prepared in accordance with Thai Financial Reporting Standards (TFRS); guidelines promulgated by the Federation of Accounting Professions (FAP); and applicable rules and regulations of the Thai Securities and Exchange Commission; and presented as prescribed by the Bank of Thailand (BoT) notification number Sor Nor Sor 21/2558, directive dated 4 December 2015, regarding “The preparation and announcement of the financial statements of commercial banks and holding companies which are the parent company of a group of companies offering financial services”.

The FAP has issued new and revised TFRS effective for annual accounting periods beginning on or after 1 January 2017. The initial application of these new and revised TFRS has resulted in changes in certain of the Bank and its subsidiaries’ accounting policies. These changes have no material effect on the financial statements.

In addition to the above new and revised TFRS, the FAP has issued a number of other new and revised TFRS which are effective for annual financial periods beginning on or after 1 January 2018 and have not been adopted in the preparation of these financial statements.

The Bank and its subsidiaries have made a preliminary assessment of the potential initial impact on the consolidated and the Bank’s financial statements of these revised TFRS and expects that there will be no material impact on the financial statements in the period of initial application.

170-304 NEW_M5.indd 183 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis except for the following items.

Items Measurement bases

Derivative financial instruments Fair value Trading investments Fair value Available-for-sale investments Fair value Premises Revaluation to fair value

The financial statements are presented in Thai Baht, which is the Bank and its subsidiaries’ functional currency.

(d) Use of judgments and estimates

184 The preparation of financial statements in conformity with TFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.

Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that create a significant risk of resulting in a material adjustment to the amounts recognised in the financial statements is included in the following notes:

Note 8 Derivatives Note 11.9 Allowance for doubtful accounts Note 23 Liabilities under insurance contracts

170-304 NEW_M5.indd 184 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Long-term technical reserves

Process involved in determining assumptions for long-term technical reserves

The subsidiary determines the long-term technical reserves by using Net Level Premium Valuation which are dependent on assumptions made by the management of the subsidiary such as mortality, morbidity and discount rate that were established at the time when insurance products were designed and as submitted to the Office of Insurance Commission. The assumptions used for calculating the liabilities throughout the life of the contract are generally unchanged.

The assumptions are reviewed annually to assess whether they reflect actual experience, and where there is an indication that they are not appropriate then the assumption will be revised to reflect actual experience. These assumptions will not be adjusted unless there is further adverse experience.

Process involved in determining assumptions of loss reserve and outstanding claims

The subsidiary determines the loss reserve and outstanding claims in accordance with internationally recognised practices. The assumptions used in the estimation of assets and liabilities are intended to result in provisions which are sufficient to cover any liabilities arising out of insurance contracts to the extent that can be reasonably foreseen. 185

However, given the uncertainty in establishing a provision for insurance claims, it is possible that the final outcome could prove to be significantly different from the original liability established.

Provision is made at the reporting date for the expected ultimate cost of settlement of all claims incurred in respect of events up to that date, whether reported or not, together with related claims handling expenses, less amounts already paid.

The subsidiary uses past experience and actuarial methods to estimate the ultimate cost of claims.

Process involved in determining premium reserves

The subsidiary determines the premium reserves by using unearned premium reserves which are calculated on a uniform basis for all types of short-term insurance contracts.

Measurement of fair values

A number of the Bank and its subsidiaries’ accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets. Details of the methods and assumptions over the measurement of fair values are provided in notes 5 and 15.

170-304 NEW_M5.indd 185 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

3.1 Basis of consolidation

The consolidated financial statements relate to the Bank and its subsidiaries (together referred to as the “Bank and its subsidiaries”) and the Bank and its subsidiaries’ interests in associate.

Business combinations

The Bank applies the acquisition method for all business combinations when control is transferred to the Bank, as describe in subsidiaries section, other than those with entities under common control.

The acquisition date is the date on which control is transferred to the acquirer. Judgment is applied in determining the acquisition date and determining whether control is transferred from one party to another.

Goodwill is measured as the fair value of the consideration transferred including the recognised amount of any non-controlling 186 interests in the acquiree, less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.

Consideration transferred includes the fair values of the assets transferred, liabilities incurred by the Bank to the previous owners of the acquiree, and equity interests issued by the Bank. Consideration transferred also includes the fair value of any contingent consideration.

A contingent liability of the acquiree is assumed in a business combination only if such a liability represents a present obligation and arises from a past event, and its fair value can be measured reliably.

Transaction costs that the Bank incurs in connection with a business combination, such as legal fees, and other professional and consulting fees are expensed as incurred.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Bank reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Step acquisition

When a business combination is achieved in stages, the Bank’s previously held equity interest in the acquiree is remeasured to its acquisition-date fair value and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

170-304 NEW_M5.indd 186 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Subsidiaries

Subsidiaries are entities controlled by the Bank. The Bank controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

Non-controlling interests

At the acquisition date, the Bank measures any non-controlling interests at its proportionate interest in the identifiable net assets of the acquiree.

Changes in the Bank’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Loss of control

When the Bank loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any 187 interest retained in the former subsidiary is measured at fair value when control is lost.

Interests in equity - accounted investees

The Bank’s interests in equity-accounted investees comprise interests in associate.

Associate is that entity in which the Bank has significant influence, but not control or joint control, over the financial and operating policies.

Interests in associate are accounted for using the equity method. They are initially recognised at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Bank’s share of the profit or loss and other comprehensive income of equity-accounted investees, until the date on which significant influence ceases.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Bank and its subsidiaries’ interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

170-304 NEW_M5.indd 187 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

The consolidated financial statements include the accounts of the Head Office, all domestic and overseas branches and the Bank’s subsidiaries. All inter-company transactions and balances within this Group have been eliminated.

The consolidated financial statements for the years ended 31 December 2017 and 2016 do not consolidate certain companies in which the Bank and/or a subsidiary has control as a result of debt restructuring and the Bank and/or the subsidiary intend to hold these investments only for a temporary period. The investment in the latter group of companies is classified as “general investments”.

3.2 Cash

Cash includes cash in hand and cash on collection.

3.3 Investments

The Bank classifies its investments in securities as trading securities, available-for-sale securities, held-to-maturity securities, general investments and investments in subsidiaries and associate. The Bank presents these investments in the statement

188 of financial position as either investments or investments in subsidiaries and associate.

Trading securities are those investments that management acquires with the intention of holding for a short period of time in order to take advantage of anticipated changes in the underlying market values. Trading securities are stated at fair value. Changes in fair value are recognised in profit or loss as gains on tradings. Interest income on trading securities is recognised using the accrual basis of accounting.

Debt securities and marketable equity securities that are not classified as trading securities, held-to-maturity securities, and investment in subsidiaries and associate are classified as available-for-sale securities and are stated at fair value, with the valuation surplus or deficit on investments presented as a component of total equity until realised upon disposition or sale of the underlying securities. Debt securities that the Bank has the positive intent and ability to hold to maturity are classified as held-to-maturity securities. Held-to-maturity investments are stated at amortised cost, less impairment losses, if any. Impairment losses and foreign exchange differences are recognised in profit or loss. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in profit or loss. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in profit or loss.

Equity securities which are not marketable and are not subsidiaries and associate are classified as general investments and are stated at the historical cost, less impairment losses, if any.

Investments in subsidiaries and associate in the Bank’s financial statements are accounted for by the cost method less impairment losses, if any.

170-304 NEW_M5.indd 188 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Investments in associate in the consolidated financial statements are accounted for by the equity method.

Investments in subsidiaries and associate acquired from troubled debt restructuring for which the Bank has received permission from the Bank of Thailand to hold the shares, and which are included in general investments and available-for-sale securities, are not required to be either accounted for by the equity method or to be consolidated.

Valuation allowances are established and recognised in profit or loss, when impairment in the value of investments has occurred.

Disposal of investments

On disposal of an investment, the difference between net disposal proceeds and the carrying amount together with the associated cumulative gain or loss that was reported in equity is recognised in profit or loss.

If the Bank and its subsidiaries dispose of part of a holding of a particular investment, the deemed cost of the part sold is determined using the weighted average method applied to the carrying value of the total holding of the investment.

3.4 Loans 189

Overdrafts are stated at the principal amounts including interest. Certain overdrafts for which special notice has been served on the borrower and other loans are stated at the principal amount. Unearned discounts received in advance are presented as a deduction from the loans.

Finance lease receivables are stated at the outstanding balance, net of unearned interest income. Unearned interest income is stated net of commissions and direct expenses incurred at the initiation of the contracts.

3.5 Allowance for doubtful accounts

The allowance for doubtful accounts represents estimation of probable losses that may have occurred from loans and other lending business at the reporting date. The amount is in compliance with the minimum allowance for doubtful accounts required based on the BoT’s guidelines. The guidelines require banks to categorise their loan portfolios into six categories. Each loan category is subject to different levels of provisioning based on percentages established by the BoT. The guidelines established the maximum collateral valuation limits for the purpose of calculating the allowance for doubtful accounts.

In addition, the BoT requires banks to perform qualitative reviews of their loans as an ongoing process. The Bank and its subsidiaries, which are financial institutions, are required to periodically report the result of their compliance with these guidelines to the BoT.

170-304 NEW_M5.indd 189 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

For corporate loans, the Bank considers a borrower’s ability to repay the obligation on an individual basis based on recent payment history, ability to generate future cash flows and other qualitative factors and the net present value of proceeds from liquidating collateral, if the expected source of repayment is from the liquidation of collateral. For SME and consumer loans, the Bank uses credit portfolio statistics to do the statistical analysis (Migration Analysis) for estimation of the deterioration in the portfolio and related allowance for loans. For finance lease receivables, since 1 September 2012, the Bank has used the Collective Approach method which considers the historical loss experience of each loan cohort.

Allowances for doubtful accounts established during the year are recognised as bad debt and doubtful accounts expense in profit or loss. Bad debts recovery is presented net of bad debt and doubtful accounts expense in profit or loss.

Bad debt written off is recorded as a decrease in the allowance for doubtful accounts. Write offs are only made for loans which the Bank has sought collection but has no prospect of further recovery. These procedures comply with BoT’s notification and guidelines.

3.6 Troubled debt restructuring

190 Troubled debt restructuring can involve any one of the following: modification of repayment terms, a reduction in the debt amount, asset disposition for debt settlement, asset transfer, and debt to equity swap.

As for modification of repayment terms, the Bank complies the Bank of Thailand’s regulations, whereby the Bank is required to use the collateral method to calculate loss and/or the current value of expected future cash flow. Fair value is calculated based on the market interest rate on the troubled debt restructuring date. Losses from troubled debt restructuring are recognised in profit or loss on the date of restructuring.

A reduction in the debt amount, asset disposition for debt settlement, asset transfer, and debt to equity swap may result in a loss from lower principal and accrued interest receivables. The Bank recognises this directly in profit or loss.

For asset transfers and debt to equity swaps, the Bank recognises the asset or transferred equity interests at fair value, less estimated selling expenses. However, the amount must not exceed the pending principal plus interest that the creditor is legally entitled to. Resultant gains or losses are recognised in profit or loss on the transfer date. This is in accordance with TAS 104 (revised 2016) Accounting for Troubled Debt Restructuring.

Subsequent to the troubled debt restructuring, the Bank recalculates the fair value of restructured debt based on the aforementioned discount rates as of the date of the financial statements and makes an adjustment to the valuation of the restructured debt, if the fair value has changed, in accordance with the BoT’s criteria. The adjustment in the valuation of restructured debt shall not cause the book value of restructured debt to exceed its value.

170-304 NEW_M5.indd 190 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

3.7 Properties for sale

Properties for sale consist of immovable and movable properties which are carried at the lower of the carrying amount of the loan or fair value of the property as at the reporting date. Should the carrying value of a property for sale become impaired, an allowance for impairment will be recorded in accordance with TAS 36 (revised 2016) Impairment of Assets.

Gains or losses on sales of properties for sale are recognised as income or expense at the date of disposal.

3.8 Premises and equipment

Recognition and measurement

Owned assets

Premises and equipment are measured at cost less accumulated depreciation and impairment losses except for land and buildings which are measured at their revalued amounts. The revalued amount is the fair value determined on the basis of the property’s existing use at the date of revaluation less any subsequent accumulated depreciation and impairment losses. 191 Cost includes expenditure that is directly attributable to the acquisition of the asset.

The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of premises and equipment have different useful lives, they are accounted for as separate items (major components) of premises and equipment.

Any gains and losses on disposal of an item of premises and equipment are determined by comparing the proceeds from disposal with the carrying amount of premises and equipment, and are recognised in profit or loss.

Revalued assets

Revaluations are performed by independent professional valuers with sufficient regularity according to guidelines prescribed by the BoT to ensure that the carrying amount of these assets does not differ materially from that which would be determined using fair values at the reporting date.

170-304 NEW_M5.indd 191 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Any increase in value, on revaluation, is recognised in other comprehensive income and presented in other reserves in equity unless it offsets a previous decrease in value recognised in profit or loss in respect of the same asset. A decrease in value is recognised in profit or loss to the extent it exceeds an increase previously recognised in other comprehensive income in respect of the same asset. The revaluation surplus is utilised by reference to the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost and transferred directly to retained earnings. Upon disposal of a revalued asset, any remaining related revaluation surplus is transferred directly to retained earnings and is not taken into account in calculating the gain or loss on disposal.

Subsequent costs

The cost of replacing a part of an item of premises and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Bank and its subsidiaries, and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of premises and equipment are recognised in profit or loss as incurred.

Depreciation 192

Depreciation is calculated based on the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each component of an item of assets. The estimated useful lives are as follows:

Premises 20-50 years Building improvement 10 years Furniture, fixtures, office equipment, equipment and vehicles 5 years

No depreciation is provided on freehold land or assets under construction.

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

3.9 Goodwill and other intangible assets

Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. The measurement of goodwill at initial recognition is described in note 3.1. Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for impairment as described in note 3.10. Negative goodwill is recognised immediately in profit or loss.

170-304 NEW_M5.indd 192 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Other intangible assets

Other intangible assets which are software licenses that are acquired by the Bank and its subsidiaries and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

Amortisation

Amortisation is based on the cost of the asset, or other amount substituted for cost, less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and 193 comparative periods are as follows:

Software licenses 5-10 years

No amortisation is provided on software under installation.

Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

3.10 Impairment

The carrying amounts of the Bank and its subsidiaries assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. For goodwill, the recoverable amount is estimated each year at the same time.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in profit or loss unless it reverses a previous revaluation credited to equity, in which case it is charged to equity.

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in profit or loss even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss.

170-304 NEW_M5.indd 193 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Calculation of recoverable amount

The recoverable amount of held-to-maturity securities carried at amortised cost is calculated as the present value of the estimated future cash flows discounted at the original effective interest rate.

The recoverable amount of available-for-sale financial assets is calculated by reference to the fair value.

The recoverable amount of a non-financial asset is the greater of the asset’s value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversals of impairment

An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be

194 related objectively to an event occurring after the impairment loss was recognised in profit or loss. For financial assets carried at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal is recognised in other comprehensive income.

An impairment loss in respect of goodwill is not reversed. Impairment losses recognised in prior periods in respect of other non-financial assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

3.11 Liabilities to deliver security

The subsidiary records its obligations to return borrowed securities as “liabilities to deliver security” in the statement of financial position.

This represents the subsidiary’s liability to return collateral, in the form of securities for private repurchase or securities borrowing and lending transactions where these securities are used to further borrow or lend in other transactions.

Gains or losses arising from securities sold short are included in determining profit or loss. Fees for borrowing and lending are recognised on an accrual basis.

170-304 NEW_M5.indd 194 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

3.12 Employee benefits

Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

Defined benefit plans

The Bank and its subsidiaries’ net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount.

The calculation of defined benefit obligations is performed by a qualified actuary using the projected unit credit method.

Remeasurements of the net defined benefit liability, actuarial gain or loss are recognised immediately in OCI. The Bank and its subsidiaries determine the interest expenses on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligations, taking into account any changes in the net defined benefit liability during the period as a result of contributions and benefit payments. Net interest expenses and other expenses 195 related to defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Bank and its subsidiaries recognise gains and losses on the settlement of a defined benefit plan when the settlement occurs.

Other long-term employee benefits

The Bank and its subsidiaries’ net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise.

Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Bank and its subsidiaries have a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

170-304 NEW_M5.indd 195 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

3.13 Provisions

A provision is recognised if, as a result of a past event, the Bank and its subsidiaries have a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

3.14 Initial recognition

The Bank and its subsidiaries initially recognise the purchase and sale of investments on the settlement date. All other financial instruments, including loans to customers, deposits and debt issued and borrowings are initially recognised on the trade date at which the Bank and its subsidiaries become a party to the contractual provisions of the instrument.

Preferred shares

196 Preferred shares are classified as equity if they are non-redeemable, or redeemable only at the Bank’s option, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon approval by the Bank’s shareholders.

Common shares

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognised as a deduction from equity, net of any tax effects.

3.15 Interest income and interest expenses

The Bank recognises interest and discounts on loans as income on an accrual basis, except for interest on loans which are outstanding over 3 months at the date of the statement of financial position and interest from receivables under troubled debt restructuring agreements where the borrowers’ ability to pay is uncertain. Such interest is recognised when received. The Bank reverses all accrued interest income for items which are no longer on an accrual basis. Interest on interbank and money market items and investments is recognised on an accrual basis.

Interest expenses are recognised in profit or loss on an accrual basis.

170-304 NEW_M5.indd 196 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Interest income on restructured loans of the Bank and its subsidiaries are recognised on the same accrual basis as used for loans mentioned above, except for loans that are subject to monitoring for compliance with restructuring conditions, where the Bank and its subsidiaries recognise interest income on a cash basis until the borrowers have been able to comply with the restructuring conditions for a period of no less than three months or three installments, whichever is longer.

Interest or discounts, which are already included in the face value of notes receivable or loans, are deferred and taken up as income evenly over the term of the notes or loans.

3.16 Income from finance lease contracts

The Bank recognises income from finance lease contracts based on the effective interest method.

Reversal of income from finance lease receivables which are outstanding over three months from the due date is made in order to comply with the guidelines of the BoT.

3.17 Fees and service income

Fees and service income for the performance of services are recognised as and when the related services are performed. 197

3.18 Dividend income

The Bank recognises dividend income in profit or loss on an accrual basis on the date which the Bank earns the rights to receive the dividend.

3.19 Gains on trading

Gains on trading are recognised based on the remeasurement to fair value of the underlying instruments in profit or loss on an accrual basis.

3.20 Contributions to the Deposit Protection Agency

Contributions to the Deposit Protection Agency are recorded as expenses on an accrual basis.

3.21 Income tax

Income tax expense for the year comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that they relate to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

170-304 NEW_M5.indd 197 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill; the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Bank and its subsidiaries expect, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

In determining the amount of current and deferred tax, the Bank and its subsidiaries take into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Bank and its subsidiaries believe that their accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including

198 interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Bank and its subsidiaries to change their judgments regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realised.

3.22 Earnings per share

Since 10 May 2009, the conversion option of the preferred shares expired. Therefore, the preferred shares’ rights are equivalent to the common shares. Basic earnings per share is calculated from net profit attributable to common shareholders of the Bank divided by the total number of common shares and preferred shares.

170-304 NEW_M5.indd 198 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

3.23 Segment reporting

Segment results that are reported to the Executive Committee (the chief operating decision maker) include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

3.24 Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Bank and its subsidiaries at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date.

Non-monetary assets and liabilities measured at cost in foreign currencies are translated to the functional currency at the exchange rates at the dates of the transactions. 199 Foreign currency differences are generally recognised in profit or loss.

Foreign operations

The assets and liabilities of foreign operations are translated to Thai Baht at the exchange rates at the reporting date.

The revenues and expenses of foreign operations are translated to Thai Baht at rates approximating the exchange rates at the dates of the transactions.

Foreign exchange differences are recognised in other comprehensive income and accumulated in the translation reserve, except to extent that the translation difference is allocated to non-controlling interests.

When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Bank disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Bank disposes of only part of an associate while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented in the foreign currency translation reserve in equity until disposal of the investment.

170-304 NEW_M5.indd 199 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

3.25 Derivatives

Recognition of derivatives is as follows:

1 Derivatives for trading are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, they are remeasured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss.

2 Derivatives for hedging: gains or losses resulting from the changes in fair values of contracts are recognised in accordance with the standard accounting treatment for income or expenses on hedged items as follows:

1. Where hedged items are measured at fair value, hedging instruments are measured at fair value consistently.

2. Where hedged items are measured on an accrual basis, hedging instruments are measured on an accrual basis consistently.

3.26 Hedging 200 Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative financial instrument is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion is recognised immediately in profit or loss.

When a hedged forecast transaction occurs and results in the recognition of a financial asset or financial liability, the gain or loss recognised in other comprehensive income does not adjust the initial carrying amount of the asset or liability but remains in equity and is reclassified from equity to profit or loss consistently with the recognition of gains and losses on the asset or liability as a reclassification adjustment.

3.27 Sales of bills of exchange

Sales of bills of exchange, with recourse, that carry no acceptances or aval of the financial institutions are recorded as liabilities under the caption of “Liabilities under commercial papers sold”. The amount of loans recorded upon the purchase of the bills are credited when the bills are due and collected.

170-304 NEW_M5.indd 200 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

3.28 Other significant accounting policies of the life insurance subsidiary

3.28.1 Classification of insurance and investment contracts

The subsidiary issues contracts that transfer insurance risk or financial risk or both.

Insurance contracts are those contracts under which the subsidiary accepts significant insurance risk from the insured by agreeing to compensate the insured or other beneficiary if a specified uncertain future event adversely affects the insured or other beneficiary. Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during this period.

Investment contracts are those contracts that transfer financial risk with no significant insurance risk.

The subsidiary defines as significant insurance risk the possibility of having to pay benefits on the occurrence of as insured event that are at least significant level more than the benefits payable if the

insured event did not occur. 201

The subsidiary does not unbundle any insurance contracts as its accounting policy recognises all premium, premium ceded, benefit payments and claims, and benefit payments and claims recovered from reinsurers through the profit or loss.

3.28.2 Recognition and measurement of insurance contracts

Premiums due and uncollected

Premiums due and uncollected are carried at anticipated realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in the collection of receivables. The allowance is generally based on collection experience, future expectations of customer payments, and a review of the current status of the premium receivables as at the end of reporting period. Bad debts are written off during the year when they are identified.

Long-term technical reserves

Long-term technical reserves are a liability for contractual benefits and claims that are expected to be incurred in the future is recorded when the premiums are recognised and is released when benefit and claims are incurred. The liability is measured using assumptions considered to be appropriate for the policies in force. The reserves are calculated by internal actuarial of the subsidiary and using an actuarial

170-304 NEW_M5.indd 201 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

method “Net Level Premium Valuation” based on assumptions for mortality, morbidity and discounted interest rate with an explicit allowance for future policy-related expenses that were established at the time when insurance products were designed and as submitted to the Office of Insurance Commission.

Loss reserves and outstanding claims

Loss reserves and outstanding claims comprise of provisions for the subsidiary’s estimate of the ultimate cost of settling all claims incurred but unpaid at the reporting date whether reported or not, and related internal and external claims handling expenses of short-term insurance contracts. Provision for insurance claims are assessed based on the subsidiary’s experience and historical data which use actuarial methods and making allowance for claims incurred but not yet reported.

Premium reserve

Premium reserve is unearned premium reserve and is calculated using written premiums for short-term insurance contracts and group insurance in accordance with the pattern of risk underwritten. 202 Unpaid policy benefits

Unpaid policy benefits represent claims and benefits payable to policyholder in relation to deaths, surrenders, maturities, other payments and policyholder deposits in respect of maturities and including related interest payable. Unpaid policy benefits are recognised at cost.

Due to insured

Due to insured consisted of the advance premium received from insured and the money as the subsidiary has to pay to insured other than the benefit under the insurance policy condition. Due to insured are recognised at cost.

Premium written and premium earned

Short-term insurance contracts

Premium written is recognised on the inception date and are presented gross of premium ceded and commissions and brokerage expenses.

Premium earned comprises of premium written during the year and change in unearned premium reserves and is recognised as revenue proportionally over the period of coverage.

170-304 NEW_M5.indd 202 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Long-term insurance contracts

First year premium written is recognised as revenue when the insurance policy is effective (or when premium is received and insurance policy is approved). Renewal premium income is recognised as revenue when premium is due and if the policy is still inforce at the end of reporting period. First year premium written and Renewal premium income are presented gross of premium ceded and commissions and brokerage expenses.

Premium received in advance is not recognised until the due date.

Commissions and brokerage expenses

Commissions and brokerage expenses are recognised as expenses when incurred.

Benefits and claims expenses

Benefits and claims expenses consist of benefits, claims and losses adjustment paid during the year, net of subrogation recoveries and changes in provision for short-term insurance claims. These benefits and 203 claims expenses are recognised as expenses when they are incurred or approved or notified or due of benefit payments as mention on insurance policy.

Reinsurance

Assets, liabilities, income and expense arising from reinsurance contracts are presented separately from the assets, liabilities, income and expense from the related insurance contracts because the reinsurance arrangements do not relieve the subsidiary from its direct obligations to its policyholders.

Premium ceded, reinsurer’s share of change in unearned premium reserve, commission income and benefits, claims and loss adjustment expenses recovered from reinsurers are recognised as expense or revenue in accordance with the pattern of reinsurance service received when incurred.

The net amount of an asset or liability, reinsurer’s share of insurance contract liabilities and reinsurance payables is presented in the statement of financial position only when the subsidiary has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. The measurement of reinsurance assets is consistent with the measurement of the underlying insurance contracts.

170-304 NEW_M5.indd 203 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Amounts recoverable under reinsurance contracts are assessed for impairment at reporting date. Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the subsidiary may not recover all amounts due and that the event has a reliably measurable impact on the amounts that the subsidiary will receive from the reinsurer.

Liability adequacy test

Short-term insurance contracts

The liability of the subsidiary under short-term insurance contracts is tested for adequacy by comparing the best estimate of future contractual cash flows with the carrying amount of gross insurance contract provisions for unearned premiums and insurance claims for in-force insurance policies at the end of reporting period by using an actuarial method based on historical claims and expense. Where an expected shortfall is identified, additional provisions are made for unearned premiums or insurance claims and are recognised in profit or loss.

204 Long-term insurance contracts

The liability of the subsidiary under long-term insurance contracts is tested for adequacy by comparing the best estimate of future contractual cash flows by using current assumptions with the carrying amount of gross insurance contract provisions for long-term technical reserves. Where an expected shortfall is identified, additional provisions are made for long-term technical reserves and are recgonised in profit or loss.

An additional provision for liability inadequacy is made where the reserves are calculated by using another actuarial method “Gross Premium Valuation” of insurance policies in-force at the reporting date based on the best estimate basis exceeds the liabilities calculated using the Net Level Premium Reserves method.

The assumptions used in the Gross Premium Valuation is in accordance with the Notification of Office of Insurance Commission regarding Assessment of Assets and Liabilities of Life Insurance Company B.E. 2554 except for discounted interest rate which the subsidiary uses the adjusted current risk-free interest rate for purpose of liability adequacy test in accordance with Life Insurance industry practice.

170-304 NEW_M5.indd 204 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

4 Financial risk management

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Bank and its subsidiaries’ risk management framework. The Board has established at the Bank and, to the extent required, at its subsidiaries an Asset and Liability Committee (ALCO), Risk Management Committee, Executive Committee and Audit Committee, which are collectively responsible for developing, implementing and monitoring the Bank and its subsidiaries risk management policies in specified areas and reporting regularly to the Board of Directors on their activities.

The Bank and its subsidiaries’ risk management policies and Internal Capital Adequacy Assessment Policy (ICAAP Policy) are established to identify and analyse the risks faced by the Bank and its subsidiaries, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. These policies are reviewed regularly to reflect changes in market conditions, products and services offered. The Bank and its subsidiaries, through implementing and monitoring appropriate policies, procedures and measures, aim to establish an effective and efficient internal control environment, in which all

employees understand their roles and obligations. 205

The Bank’s Audit Committee is responsible for monitoring compliance with the Bank and its subsidiaries’ risk management policies and procedures, and for reviewing the adequacy of the risk management framework in relation to the risks faced by the Bank and its subsidiaries. The Bank’s Audit Committee is assisted in these functions by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Bank’s Audit Committee.

4.1 Credit risk

Credit risk refers to risk arising from the failure of either debtors to repay principal and interest as agreed, or of counterparties to comply with conditions or contracts. Credit risk covers all types of financial products: transactions on-financial reporting such as loans, overdrafts, bills of exchange, and other types of debts; and those off-financial reporting such as derivatives trading, letters of guarantee etc.

170-304 NEW_M5.indd 205 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

The Bank and its subsidiaries have established a credit function organisational structure based on a system of checks and balances. Business units are clearly separated from credit approval units. Credit approval authority at each level is assigned to match potential risk or loss levels. Credit risk management policies and frameworks for critical credit risk have been developed and approved by the Board of Directors. For example:

• Credit policy guide • Collateral and NPA appraisal policy • Loan Classification, Provision and Bad Debt Write-Off Policy and Practice • Credit risk model governance policy • Credit risk rating for non-retail exposures • Counterparty risk management policy • Country risk management policy

Since credit risk varies by type of credit, different risk measurement methods are applied, ranging from basic statistical tools to more advanced ones, to appropriately reflect the credit risk of each type of product/transaction. 206 The Bank and its subsidiaries have credit risk reporting on a regular basis. The Bank and its subsidiaries credit risk report, including loan growth, debt quality, credit concentration, and investment diversification, is presented to the Risk Management Committee on a monthly basis.

4.2 Interest rate risk

Interest rate risk arises from the change in interest rates which may affect the net interest earnings in the current reporting period and in the future and/or economic value. Interest rate risk arises from the structure and characteristics of the Bank and its subsidiaries’ assets, liabilities, equity and off-financial reporting items.

The Bank and its subsidiaries have established policies for interest rate risk management to ensure that interest rate risk remains within the Bank’s risk appetite. The Bank and its subsidiaries use various derivative transactions to manage its own asset and liability positions in order to manage interest rate exposure. The use of derivative transactions is in accordance with the policies and guidelines set by the Board of Directors and the Executive Committee (EXCOM) and is under the oversight and control of the Assets and Liabilities Committee (ALCO).

170-304 NEW_M5.indd 206 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

As at 31 December 2017 and 2016, significant financial assets and liabilities can be repriced as follows:

(in million Baht)

Consolidated 2017 Reprice Reprice within Reprice Non Non on 3 3 - 12 1 - 5 Over Performing interest demand months months years 5 years Loans bearing Total

Financial assets

Cash ------40,797 40,797 Interbank and money market items * 15,180 270,023 3,629 2,018 4,648 - 21,465 316,963 Investments, net - 84,337 144,281 98,655 212,727 - 30,371 570,371 Loans to customers ** 967,200 385,341 180,035 399,538 37,058 65,560 - 2,034,732 207 Total financial assets 982,380 739,701 327,945 500,211 254,433 65,560 92,633 2,962,863

Financial liabilities

Deposits 1,300,295 317,140 375,980 20,826 - - 78,216 2,092,457 Interbank and money market items 13,381 69,062 2,444 3,899 12,920 - 6,867 108,573 Debt issued and borrowings - 4,371 127 24,773 49,267 - - 78,538 Total financial liabilities 1,313,676 390,573 378,551 49,498 62,187 - 85,083 2,279,568 Difference (331,296) 349,128 (50,606) 450,713 192,246 65,560 7,550 683,295

* Before deducting allowance for doubtful accounts amounting to Baht 230 million

** Net of deferred revenue

170-304 NEW_M5.indd 207 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht)

Consolidated 2016 Reprice Reprice within Reprice Non Non on 3 3 - 12 1 - 5 Over Performing interest demand months months years 5 years Loans bearing Total

Financial assets

Cash ------40,489 40,489 Interbank and money market items * 11,892 212,966 5,165 4,050 2,257 - 21,113 257,443 Investments, net - 101,367 147,757 120,376 195,078 - 26,009 590,587 Loans to customers ** 992,627 360,541 180,510 322,048 25,729 57,593 - 1,939,048 Total financial assets 1,004,519 674,874 333,432 446,474 223,064 57,593 87,611 2,827,567

208 Financial liabilities

Deposits 1,161,442 399,702 397,265 6,325 - - 61,538 2,026,272 Interbank and money market items 13,090 49,840 17,364 3,295 11,486 - 5,878 100,953 Debt issued and borrowings - 1,181 39,483 26,162 40,012 - - 106,838 Total financial liabilities 1,174,532 450,723 454,112 35,782 51,498 - 67,416 2,234,063 Difference (170,013) 224,151 (120,680) 410,692 171,566 57,593 20,195 593,504

* Before deducting allowance for doubtful accounts amounting to Baht 187 million

** Net of deferred revenue

170-304 NEW_M5.indd 208 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht)

The Bank 2017 Reprice Reprice within Reprice Non Non on 3 3 - 12 1 - 5 Over Performing interest demand months months years 5 years Loans bearing Total

Financial assets

Cash ------40,591 40,591 Interbank and money market items * 13,170 269,439 763 - - - 20,335 303,707 Investments, net - 80,917 142,249 55,541 10,414 - 9,912 299,033 Loans to customers ** 956,586 385,341 180,035 397,509 37,058 64,537 - 2,021,066 Total financial assets 969,756 735,697 323,047 453,050 47,472 64,537 70,838 2,664,397

209 Financial liabilities

Deposits 1,296,985 316,925 375,976 20,826 - - 77,178 2,087,890 Interbank and money market items 14,436 69,062 2,444 3,899 13,820 - 7,251 110,912 Debt issued and borrowings - 556 127 25,430 49,267 - - 75,380 Total financial liabilities 1,311,421 386,543 378,547 50,155 63,087 - 84,429 2,274,182 Difference (341,665) 349,154 (55,500) 402,895 (15,615) 64,537 (13,591) 390,215

* Before deducting allowance for doubtful accounts amounting to Baht 230 million

** Net of deferred revenue

170-304 NEW_M5.indd 209 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht)

The Bank 2016 Reprice Reprice within Reprice Non Non on 3 3 - 12 1 - 5 Over Performing interest demand months months years 5 years Loans bearing Total

Financial assets

Cash ------40,317 40,317 Interbank and money market items * 9,392 212,336 2,416 - - - 19,945 244,089 Investments, net - 95,188 147,309 90,603 21,028 - 8,948 363,076 Loans to customers ** 984,155 360,541 180,510 319,786 25,729 56,544 - 1,927,265 Total financial assets 993,547 668,065 330,235 410,389 46,757 56,544 69,210 2,574,747

210 Financial liabilities

Deposits 1,158,228 399,105 397,261 6,325 - - 60,535 2,021,454 Interbank and money market items 15,162 49,840 17,364 3,295 11,936 - 6,182 103,779 Debt issued and borrowings - 267 39,483 26,891 40,012 - - 106,653 Total financial liabilities 1,173,390 449,212 454,108 36,511 51,948 - 66,717 2,231,886 Difference (179,843) 218,853 (123,873) 373,878 (5,191) 56,544 2,493 342,861

* Before deducting allowance for doubtful accounts amounting to Baht 187 million

** Net of deferred revenue

170-304 NEW_M5.indd 210 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

As at 31 December 2017 and 2016, interest earning and interest bearing financial instruments were as follows:

Consolidated 2017 2016 Average Average Average Interest interest rate Average Interest interest rate (in million Baht) (%) (in million Baht) (%)

Interbank and money market items, net (Assets) 286,995 5,028 1.8 259,100 4,206 1.6 Investments, net 580,479 13,185 2.3 563,621 12,827 2.3 Loans to customers * 1,986,890 106,812 5.4 1,886,227 105,323 5.6 Deposits 2,059,365 19,006 0.9 1,958,501 20,225 1.0 Interbank and money market items (Liabilities) 104,763 1,218 1.2 121,945 1,034 0.8 211 Debt issued and borrowings 92,688 3,091 3.3 114,001 3,904 3.4

* Net of deferred revenue

The Bank 2017 2016 Average Average Average Interest interest rate Average Interest interest rate (in million Baht) (%) (in million Baht) (%)

Interbank and money market items, net (Assets) 273,689 4,583 1.7 245,197 3,794 1.5 Investments, net 331,055 4,969 1.5 348,469 5,428 1.6 Loans to customers * 1,974,166 105,991 5.4 1,874,464 104,835 5.6 Deposits 2,054,672 18,984 0.9 1,953,179 20,220 1.0 Interbank and money market items (Liabilities) 107,345 1,245 1.2 124,748 1,049 0.8 Debt issued and borrowings 91,016 3,050 3.4 114,019 3,874 3.4

* Net of deferred revenue

170-304 NEW_M5.indd 211 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

4.3 Foreign exchange risk

Foreign exchange risk is the risk that occurs from changes in exchange rates which may affect the value of the financial instruments or may cause volatility in the Bank’s earnings or fluctuations in value of the financial assets and liabilities.

It is the Bank’s policy to manage foreign exchange risk by setting risk limits on foreign exchange risk exposures. These limits are net open position limits, open position by currency, management action triggers, and value at risk which are monitored on a daily basis and in compliance with the Bank of Thailand’s regulations on foreign exchange.

As at 31 December 2017 and 2016, financial assets and liabilities denominated in the various currencies as follows:

(in million Baht) Consolidated 2017 USD EURO YEN SGD Others

212 Financial assets Cash 592 204 98 38 307 Interbank and money market items * 22,605 298 537 585 2,518 Investments, net 11,555 2,238 871 756 331 Loans to customers ** 98,360 5,512 217 11,527 1,435 Accrued interest receivables 186 14 - 4 4 Total financial assets 133,298 8,266 1,723 12,910 4,595

Financial liabilities

Deposits 48,108 1,125 542 2 1,410 Interbank and money market items 8,250 271 - - 546 Debt issued and borrowings 53,785 20 - - - Other liabilities 476 - - - 4 Total financial liabilities 110,619 1,416 542 2 1,960 On-financial reporting items, net 22,679 6,850 1,181 12,908 2,635 Off-financial reporting items - contingencies (currency swap contracts) (8,589) (7,461) 780 (12,584) (1,047)

* Before deducting allowance for doubtful accounts

** Net of deferred revenue

170-304 NEW_M5.indd 212 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Consolidated 2016 USD EURO YEN SGD Others

Financial assets

Cash 495 166 102 39 240 Interbank and money market items * 29,992 375 452 232 2,070 Investments, net 14,431 2,264 23,154 773 453 Loans to customers ** 102,157 2,428 217 11,381 888 Accrued interest receivables 250 15 - 3 4 Total financial assets 147,325 5,248 23,925 12,428 3,655

Financial liabilities

Deposits 69,013 1,014 242 2 1,444 213 Interbank and money market items 2,468 247 - - - Debt issued and borrowings 65,573 - - - - Other liabilities 702 - - - 14 Total financial liabilities 137,756 1,261 242 2 1,458 On-financial reporting items, net 9,569 3,987 23,683 12,426 2,197 Off-financial reporting items - contingencies (currency swap contracts) (1,174) (3,257) (25,264) (12,129) 1,160

* Before deducting allowance for doubtful accounts

** Net of deferred revenue

170-304 NEW_M5.indd 213 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 USD EURO YEN SGD Others

Financial assets

Cash 394 204 98 38 306 Interbank and money market items * 17,355 298 537 585 2,498 Investments, net 2,566 3 871 756 331 Loans to customers ** 95,802 5,512 217 11,527 1,435 Accrued interest receivables 172 14 - 4 4 Total financial assets 116,289 6,031 1,723 12,910 4,574

Financial liabilities

Deposits 42,648 1,125 542 2 1,390 214 Interbank and money market items 8,315 271 - - 546 Debt issued and borrowings 54,442 20 - - - Other liabilities 475 - - - 4 Total financial liabilities 105,880 1,416 542 2 1,940 On-financial reporting items, net 10,409 4,615 1,181 12,908 2,634 Off-financial reporting items - contingencies (currency swap contracts) (1,973) (5,939) 780 (12,584) (1,047)

* Before deducting allowance for doubtful accounts

** Net of deferred revenue

170-304 NEW_M5.indd 214 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2016 USD EURO YEN SGD Others

Financial assets

Cash 330 166 102 39 239 Interbank and money market items * 25,242 375 452 232 2,061 Investments, net 1,791 3 23,104 773 310 Loans to customers ** 99,248 2,428 217 11,381 888 Accrued interest receivables 233 15 - 3 4 Total financial assets 126,844 2,987 23,875 12,428 3,502

Financial liabilities

Deposits 63,359 1,014 242 2 1,439 215 Interbank and money market items 2,644 247 - - - Debt issued and borrowings 66,302 - - - - Other liabilities 701 - - - 14 Total financial liabilities 133,006 1,261 242 2 1,453 On-financial reporting items, net (6,162 1,726 23,633 12,426 2,049 Off-financial reporting items - contingencies (currency swap contracts) 6,207 (1,784) (25,329) (12,129) 1,079

* Before deducting allowance for doubtful accounts

** Net of deferred revenue

170-304 NEW_M5.indd 215 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

4.4 Equity risk

Equity risk is the risk arising from changes in the price of equities or common stock that may cause volatility in earning or fluctuations in the value of financial assets. The Bank and its subsidiaries have policies to manage the risk by maintaining long-term equity investments and investing in growth potential equities and/or those intended to support the business. The Bank has established the Policy that only companies within the Financial Group that are engaged in the financial business with specific supervisory bodies and those permitted to engage in portfolio management can initiate action with respect to equity investments, as allowed under applicable regulations. The Bank has closely managed and monitored market situations to provide information for management to monitor the risk to the Bank. (Further details of equity investments are provided under notes 9 and 10).

4.5 Liquidity risk

Liquidity risk is the risk that the Bank may not be able to meet its obligations as they fall due, because of an inability to realise assets or to cover funding requirements at an appropriate price, thus resulting in losses to the Bank.

216 In order to manage liquidity risk, the Bank has established a Liquidity Risk Management Policy which is approved by the Board of Directors. In addition, the Assets and Liabilities Committee ensures that its liquidity risk management complies with the said policy.

The Bank has implemented a system to monitor liquidity management on a daily basis in both Baht and foreign currencies by applying a number of risk management tools, such as net daily liquidity position report in both the remaining time to maturity and with behavioral adjustments, individual foreign currency position report. In addition, the Bank also determines relevant risk limits to be adopted to measure, monitor and control liquidity risk to remain at an acceptable level, which is further reported to the senior management of the Bank on a daily basis.

The Bank also conducts stress test on regular basis to estimate impact under each stress scenario as required by the Bank of Thailand and using scenarios developed by the Bank. The stress test results may result in the development of contingency funding plan. The contingency funding plan establishes appropriate action plans based on specific scenarios and assigns clear roles and responsibility to manage liquidity in the event of a given crisis.

As at 31 December 2017, the liquidity ratio (liquid assets to total deposits) stood at 26.9% on a bank-only basis (2016: 28.8%).

170-304 NEW_M5.indd 216 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

As at 31 December 2017 and 2016, financial assets and liabilities were classified according to their contractual maturity as follows: (in million Baht) Consolidated 2017 Maturity Maturity within Maturity on 3 3 - 12 1 - 5 over No demand months months years 5 years maturity Total

Financial assets

Cash - - - - - 40,797 40,797 Interbank and money market items* 35,996 269,383 3,037 3,522 5,025 - 316,963 Investments, net** - 80,937 141,856 55,552 10,414 17,010 305,769 Loans to customers*** 184,694 302,526 209,018 683,988 654,506 - 2,034,732 Accrued interest receivables - 3,328 - - - - 3,328 217 Total financial assets 220,690 656,174 353,911 743,062 669,945 57,807 2,701,589

Financial liabilities

Deposits 1,360,166 324,417 382,032 25,842 - - 2,092,457 Interbank and money market items 20,248 63,777 2,990 8,638 12,920 - 108,573 Debt issued and borrowings - 4,371 127 24,773 49,267 - 78,538 Other liabilities - 892 3,491 51 - - 4,434 Total financial liabilities 1,380,414 393,457 388,640 59,304 62,187 - 2,284,002 Net liquidity gap (1,159,724) 262,717 (34,729) 683,758 607,758 57,807 417,587

* Before deducting allowance for doubtful accounts amounting to Baht 230 million ** Investments of the life insurance subsidiary which are held primarily in relation to insurance contract liabilities, are not presented in the table

*** Net of deferred revenue

170-304 NEW_M5.indd 217 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Consolidated 2016 Maturity Maturity within Maturity on 3 3 - 12 1 - 5 over No demand months months years 5 years maturity Total

Financial assets

Cash - - - - - 40,489 40,489 Interbank and money market items* 32,435 213,128 5,347 4,087 2,446 - 257,443 Investments, net** - 94,972 147,314 90,603 21,039 10,535 364,463 Loans to customers*** 179,009 281,354 206,459 637,073 635,153 - 1,939,048 Accrued interest receivables - 4,128 - - - - 4,128 Total financial assets 211,444 593,582 359,120 731,763 658,638 51,024 2,605,571

218 Financial liabilities

Deposits 1,210,353 399,800 402,314 13,805 - - 2,026,272 Interbank and money market items 18,968 48,049 17,364 5,086 11,486 - 100,953 Debt issued and borrowings - 1,181 39,483 26,162 40,012 - 106,838 Other liabilities - 1,401 3,571 30 - - 5,002 Total financial liabilities 1,229,321 450,431 462,732 45,083 51,498 - 2,239,065 Net liquidity gap (1,017,877) 143,151 (103,612) 686,680 607,140 51,024 366,506

* Before deducting allowance for doubtful accounts amounting to Baht 187 million ** Investments of the life insurance subsidiary which are held primarily in relation to insurance contract liabilities, are not presented in the table

*** Net of deferred revenue

170-304 NEW_M5.indd 218 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 Maturity Maturity within Maturity on 3 3 - 12 1 - 5 over No demand months months years 5 years maturity Total

Financial assets

Cash - - - - - 40,591 40,591 Interbank and money market items* 33,438 268,769 - 1,500 - - 303,707 Investments, net - 80,917 142,249 55,541 10,414 9,912 299,033 Loans to customers** 174,022 302,526 208,852 681,160 654,506 - 2,021,066 Accrued interest receivables - 2,964 - - - - 2,964 Total financial assets 207,460 655,176 351,101 738,201 664,920 50,503 2,667,361

219 Financial liabilities

Deposits 1,355,818 324,202 382,028 25,842 - - 2,087,890 Interbank and money market items 21,687 63,777 2,990 8,638 13,820 - 110,912 Debt issued and borrowings - 556 127 25,430 49,267 - 75,380 Other liabilities - 891 3,491 51 - - 4,433 Total financial liabilities 1,377,505 389,426 388,636 59,961 63,087 - 2,278,615 Net liquidity gap (1,170,045) 265,750 (37,535) 678,240 601,833 50,503 388,746

* Before deducting allowance for doubtful accounts amounting to Baht 230 million

** Net of deferred revenue

170-304 NEW_M5.indd 219 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2016 Maturity Maturity within Maturity on 3 3 - 12 1 - 5 over No demand months months years 5 years maturity Total

Financial assets

Cash - - - - - 40,317 40,317 Interbank and money market items* 29,292 212,444 2,353 - - - 244,089 Investments, net - 95,189 147,308 90,603 21,028 8,948 363,076 Loans to customers** 170,478 281,354 206,369 633,911 635,153 - 1,927,265 Accrued interest receivables - 3,505 - - - - 3,505 Total financial assets 199,770 592,492 356,030 724,514 656,181 49,265 2,578,252

220 Financial liabilities

Deposits 1,206,136 399,203 402,310 13,805 - - 2,021,454 Interbank and money market items 21,344 48,049 17,364 5,086 11,936 - 103,779 Debt issued and borrowings - 267 39,483 26,891 40,012 - 106,653 Other liabilities - 1,404 3,571 30 - - 5,005 Total financial liabilities 1,227,480 448,923 462,728 45,812 51,948 - 2,236,891 Net liquidity gap (1,027,710) 143,569 (106,698) 678,702 604,233 49,265 341,361

* Before deducting allowance for doubtful accounts amounting to Baht 187 million

** Net of deferred revenue

Loans to deposits ratio

As at 31 December 2017 and 2016, the loans to deposits ratios in the consolidated financial statements were as follows:

(%) 2017 2016

Gross loans to deposits ratio (Consolidated financial statements) 97.2 95.7 Gross loans to deposits and B/E ratio (Consolidated financial statements) 97.2 95.7

170-304 NEW_M5.indd 220 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

4.6 Insurance risk

Risk of loss resulting from unexpected events, deviations from actuarial assumptions, the magnitude and timing of claims, policyholder behavior, expenses and mispricing.

Product design and mispricing risk

Product design and mispricing risk refers to potential defects in the development process of a particular insurance product, inadequate assessment of risk and/or inaccurate assumptions used to price insurance product.

All new products must be approved by the Product Approval Committee (PAC) which is composed of members of the subsidiary’s Executive Management and other stakeholders. The PAC ensures the soundness and appropriateness of new products’ pricing and design.

Pricing assumptions are regularly reviewed to incorporate the latest experience and reflect the prevailing economic and business environment.

Once a product launched, both performance and actuarial experience are monitored and reported on a regular basis to 221 ensure appropriate actions are triggered if deemed necessary.

Underwriting risks

Underwriting risk arises from inaccurate assessment of the risks entailed in writing of an insurance policy.

The subsidiary has an underwriting process that classifies applicants into risk categories based on their medical history, health condition, occupation, etc. Coverage and premium can vary across categories, reflecting different levels of risk.

Mortality and morbidity risk

Mortality and morbidity risk refers to the possibility that the frequency or severity of claims arising from insurance contracts exceeds the level assumed when the products were priced.

The subsidiary can be exposed to high claims from policyholders resulting from changes in their life and health expectancy or from catastrophic events, whether natural or man-made.

Claim trends are monitored on an ongoing basis. Exposure in excess of retention limits is ceded to reinsurers. Mortality and morbidity experience is monitored to ensure that the subsidiary’s assumptions are appropriate.

170-304 NEW_M5.indd 221 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Policyholder behavior risk

Risk that arises from policyholders’ acts to discontinue/reduce contributions or surrender request prior to maturity of the contract, or to falsely obtain a particular insurance coverage or claims some benefit to which they are not otherwise entitled to.

Persistency is regularly monitored through reports and comprehensive analysis.

An underwriting process and claim management are also designed in place to avoid fraudulent behavior from policyholders.

Concentration of insurance risk

Concentrations of risk may arise where a particular event or a series of events could impact heavily upon the subsidiary’s insurance contract liabilities.

Most of the subsidiary’s contracts are life insurance non-par contracts with guaranteed benefits. The amount of risk to which the subsidiary is exposed depends on the level of guarantees inherent in the contracts and the current interest 222 rate. The changes in interest rate will not cause a change to the amount of the liability, unless the change is material enough to trigger a liability adequacy test adjustment.

As at 31 December 2017, the discount interest rates for the purpose of the liability adequacy test, in accordance with industry practice, is the weighted average of past eight quarters of the zero coupon Thailand government bond yield curve plus an illiquidity premium for various tenors as prescribed by the regulator. The illiquidity premium is in line with an industry practice (i.e. ranging between 25 - 42 basis points) as at 31 December 2017. Management monitors the sensitivity to changes in interest rates on an ongoing basis. A decrease of 8 basis points from current market interest rates would not trigger an increase in liability adequacy test reserves.

Capital management of life insurance subsidiary

The subsidiary’s capital management policy is to maintain a strong capital base to meet policyholders’ obligations and the requirements of the Office of Insurance Commission, to create shareholder value, deliver sustainable returns to shareholders and to support future business growth.

In accordance with the requirements of the Office of Insurance Commission, all insurers are required to maintain a minimum at least 140% of capital adequacy requirement (CAR) to meet policyholders’ obligations. The CAR applies a risk-based approach to capital adequacy and is determined by the sum of the aggregate of the total risk requirement of all insurance funds established and maintained by the insurer. It is the subsidiary’s policy to hold capital levels in excess of CAR.

170-304 NEW_M5.indd 222 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

The subsidiary’s objectives in managing capital are to safeguard the subsidiary’s ability to continue as a going concern in order to protect policyholders and to provide returns for shareholders and benefits for the stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain as adjust the capital structure, the subsidiary may adjust the amount of dividends paid to shareholders, return capital to shareholders, and issue new shares.

There were no changes in the subsidiary’s approach to capital management during the year.

5 Fair value of assets and liabilities

The Bank and its subsidiaries have an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including level 3 fair values, and reports through to the chief financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information,

such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence 223 obtained from the third parties to support the conclusion these valuations meet the requirements of TFRS, including the level in the fair value hierarchy in which the valuations should be classified.

Significant valuation issues are reported to the Bank and its subsidiaries’ Audit Committee.

When measuring the fair value of an asset or a liability, the Bank and its subsidiaries use observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Bank and its subsidiaries recognised transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. There were no transfers between levels of the fair value hierarchy during the year ended 31 December 2017.

170-304 NEW_M5.indd 223 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Carrying amounts and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy for financial instruments measured at fair value. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

5.1 Financial instruments measured at fair value The fair value of financial instruments measured at fair value in the consolidated and the Bank statement of financial position were as follows:

(in million Baht) Consolidated The Bank Fair value Fair value Level 1 Level 2 Total Level 1 Level 2 Total

224 2017 Financial assets Derivatives assets - Foreign exchange rate - 26,362 26,362 - 26,728 26,728 - Interest rate - 15,749 15,749 - 15,583 15,583 - Others - 195 195 - 2,531 2,531 Total - 42,306 42,306 - 44,842 44,842

Investments - Trading securities 7,066 9,127 16,193 - 9,101 9,101 - Available-for-sale securities 21,863 410,201 432,064 8,482 268,383 276,865 Total 28,929 419,328 448,257 8,482 277,484 285,966

Total financial assets 28,929 461,634 490,563 8,482 322,326 330,808

Financial liabilities Derivatives liabilities - Foreign exchange rate - 24,526 24,526 - 27,519 27,519 - Interest rate - 14,398 14,398 - 14,351 14,351 - Others 278 5,524 5,802 - 2,493 2,493 Total financial liabilities 278 44,448 44,726 - 44,363 44,363

170-304 NEW_M5.indd 224 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Consolidated The Bank Fair value Fair value Level 1 Level 2 Total Level 1 Level 2 Total

2016 Financial assets

Derivatives assets - Foreign exchange rate - 36,637 36,637 - 37,372 37,372 - Interest rate - 19,056 19,056 - 19,056 19,056 - Others - 47 47 - 356 356 Total - 55,740 55,740 - 56,784 56,784

Investments - Trading securities 1,561 27,315 28,876 - 27,292 27,292 225 - Available-for-sale securities 23,354 415,119 438,473 7,882 313,920 321,802 Total 24,915 442,434 467,349 7,882 341,212 349,094

Total financial assets 24,915 498,174 523,089 7,882 397,996 405,878

Financial liabilities

Derivatives liabilities - Foreign exchange rate - 37,520 37,520 - 37,485 37,485 - Interest rate - 15,675 15,675 - 15,675 15,675 - Others 59 244 303 - 284 284 Total financial liabilities 59 53,439 53,498 - 53,444 53,444

The Bank and its subsidiaries determine Level 2 fair values for debt securities using quoted market prices for identical or similar instruments in active markets or other inputs that are observable market data.

Level 2 fair values for over-the-counter derivative financial instruments are derived using broker quotes in active markets. Fair values reflect the credit risk of the counterparty.

170-304 NEW_M5.indd 225 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

5.2 Financial instruments not measured at fair value

Fair value hierarchy of financial instruments which are not measured at fair value and for which there is a significant difference with carrying amount as at 31 December 2017 and 2016 were as follows: (in million Baht) Consolidated The Bank Carrying Fair value Carrying Fair value amount Level 2 amount Level 2

2017 Financial assets Derivatives assets 1,193 692 1,193 692 Held-to-maturity securities 120,671 134,404 11,637 12,749

Financial liabilities 226 Derivatives liabilities 258 285 258 285

(in million Baht) Consolidated The Bank Carrying Fair value Carrying Fair value amount Level 2 amount Level 2

2016 Financial assets Derivatives assets 2,851 2,984 2,851 2,984 Held-to-maturity securities 122,166 133,768 12,915 13,998

Financial liabilities Derivatives liabilities 694 651 694 651

170-304 NEW_M5.indd 226 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

The following methods and assumptions are used in estimating fair market values of financial instruments as disclosed herein:

Interbank and money market Fair value calculated based on present value of estimated cash flows, using the items (Assets): current interest rate in the money market.

Derivatives: The fair values of derivatives are obtained from quoted market prices in active markets, where available. Fair values of derivatives in an illiquid market are obtained using an average price (quoted from several reliable sources), valuation technique and a benchmark price of instruments which have similar characteristics, as appropriate.

Investments: The following methodologies are used to determine the fair value of securities held by the Bank.

- The fair value of debt securities is estimated based on the Thai Bond Market Association’s last average bid price. In situations where no auction prices are available, the fair value is estimated based on the last executed price. For debt 227 securities with no active market price, the fair value is estimated based on the yield curve of debt securities plus a risk premium.

- The bidding prices at The Stock Exchange of Thailand on the last business day of the year are used to estimate the fair value of listed private sector equity securities and listed unit trust.

- The fair value of non listed unit trusts is estimated based on the net asset value at the reporting date.

- The fair value of foreign debt and equity securities listed on foreign stock exchanges is estimated by using the bid prices at such exchanges as of the last business day of the year. The fair value of non-listed foreign debt and equity securities is determined based on values quoted by reliable international financial institutions.

Loans to customers and accrued - For variable-rate loans that are repriced frequently and have no significant interest receivables: change in credit risk, fair values are based on carrying amount.

- Fair values of other loans are estimated using discounted cash flow analyses, using market interest rates or the fair value of collateral. There is no significant difference with the carrying amount.

170-304 NEW_M5.indd 227 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Deposits and interbank and - The carrying amount disclosed for deposits which are payable on demand by money market items (Liabilities): the depositor, are equal to the fair value of such deposits.

- Fair values for fixed-deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on similar deposits.

- The carrying amount of interbank and money market items approximates their fair value.

Liabilities payable on demand: The carrying amount of liabilities payable on demand approximates fair value.

Debt issued and borrowings: - The carrying amounts of short-term borrowings maturing within 90 days approximate their fair values.

- Fair values of other borrowings are estimated using discounted cash flow analyses based on the Bank’s current borrowing rates for similar types of borrowing

228 arrangements.

6 Maintenance of capital fund

The Bank and its subsidiaries, which are financial institutions, are subject to various capital and regulatory requirements of the Bank of Thailand. Under these capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank and its subsidiaries must satisfy specific capital guidelines that involve, among others, quantitative measures of the Bank’s and its subsidiaries’ assets, liabilities and certain off-financial reporting items as calculated in accordance with regulatory practices. The Bank’s and its subsidiaries’ capital amounts and classifications are also subject to qualitative judgments by the Bank of Thailand as to components, risk weightings, and other factors. These capital and regulatory requirements are subject to change, as considered necessary by the Bank of Thailand.

The Bank maintains its capital fund in accordance with the Financial Institution Business Act B.E. 2551 by maintaining its capital fund as a proportion of risk weighted assets in accordance with the criteria, methodologies, and conditions prescribed by the Bank of Thailand. As announced by the BoT in its circulars dated 8 November 2012 and 8 May 2015, the Bank is required to calculate its Capital Fund in accordance with Basel III. As at 31 December 2017 and 2016, the Consolidated Supervision group and the Bank’s total capital funds were categorised as follows:

170-304 NEW_M5.indd 228 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Basel III Consolidated Supervision 2017 2016

Tier 1 capital Common Equity Tier 1 (CET1) Issued and paid-up share capital 33,992 33,992 Premium on share capital 11,124 11,124 Legal reserve 7,000 7,000 Net gain after appropriations 265,905 236,110 Disclosed reserves Other comprehensive income 20,476 16,709 Other owner changes items (2,365) (2,364) Capital deduction items on CET1 (14,193) (8,005) 229 Total Tier 1 capital 321,939 294,566

Tier 2 capital Subordinated debt 20,000 36,000 Allowance for classified assets of “normal” category 22,564 21,752 Total Tier 2 capital 42,564 57,752 Total capital funds 364,503 352,318

Total risk weighted assets 2,055,938 1,986,927

Total capital / Total risk weighted assets (minimum 9.75%*) 17.7% 17.7% Total Tier 1 capital / Total risk weighted assets (minimum 7.25%*) 15.6% 14.8% Total Tier 1 common equity / Total risk weighted assets (minimum 5.75%*) 15.6% 14.8% Total Tier 2 capital / Total risk weighted assets 2.1% 2.9%

* Conservation buffer requires additional Common Equity Tier 1 of 0.625% per annum from 1 January 2016 onwards until reaching 2.50%

in 2019

Capital after deducting capital add-on arising from Single Lending Limit 363,997 351,110 Capital ratio after deducting capital add-on arising from Single Lending Limit 17.7% 17.7%

170-304 NEW_M5.indd 229 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Basel III The Bank 2017 2016

Tier 1 capital Common Equity Tier 1 (CET1) Issued and paid-up share capital 33,992 33,992 Premium on share capital 11,124 11,124 Legal reserve 7,000 7,000 Net gain after appropriations 242,348 218,192 Other comprehensive income 16,596 16,672 Capital deduction items on CET1 (11,082) (6,872) Total Tier 1 capital 299,978 280,108 230 Tier 2 capital Subordinated debt 20,000 36,000 Allowance for classified assets of “normal” category 21,754 21,165 Total Tier 2 capital 41,754 57,165 Total capital funds 341,732 337,273

Total risk weighted assets 1,984,315 1,933,848

Total capital / Total risk weighted assets (minimum 9.75%*) 17.2% 17.4% Total Tier 1 capital / Total risk weighted assets (minimum 7.25%*) 15.1% 14.5% Total Tier 1 common equity / Total risk weighted assets (minimum 5.75%*) 15.1% 14.5% Total Tier 2 capital / Total risk weighted assets 2.1% 2.9%

* Conservation buffer requires additional Common Equity Tier 1 of 0.625% per annum from 1 January 2016 onwards until reaching 2.50%

in 2019

Capital after deducting capital add-on arising from Single Lending Limit 341,029 336,083 Capital ratio after deducting capital add-on arising from Single Lending Limit 17.2% 17.4%

170-304 NEW_M5.indd 230 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Disclosures of capital maintenance information under Bank of Thailand Notification number Sor Nor Sor 4/2556 dated 2 May 2013 on the Public Disclosures of Capital Maintenance for Commercial Banks and Bank of Thailand Notification number Sor Nor Sor 5/2556 dated 2 May 2013 on the Public Disclosures of Capital Maintenance for Financial Group, were as follows:

Location of disclosure The Bank’s website under Investor Relations section at http://www.scb.co.th/en/about-scb/investor-relations/financial-information/pillar Date of disclosure Within 4 months after the year end date as indicated in the notification Information as of 31 December 2017

Capital management

The Bank and its subsidiaries policies are to maintain a strong capital base so as to provide a cushion against future uncertainties, engender market confidence in the Bank’s robustness and to support business growth. Further, the impact of the level of capital on shareholders’ returns is also considered together with the need to maintain a balance between

the higher returns that might be possible with higher gearing and the advantages and security afforded by a sound capital 231 position.

The Bank and its subsidiaries have complied with BoT imposed capital requirements throughout the year and, as noted in the table above, its capital level is well in excess of the minimum requirements.

170-304 NEW_M5.indd 231 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

7 Interbank and money market items, net (Assets)

As at 31 December 2017 and 2016, interbank and money market items, net (Assets) were as follows: (in million Baht) Consolidated 2017 2016 Demand Time Total Demand Time Total

Domestic items: Bank of Thailand and Financial Institutions Development Fund 13,731 241,439 255,170 14,667 181,545 196,212 Commercial banks 1,824 20,303 22,127 1,389 18,533 19,922 Specialised financial institutions* - - - - 3,293 3,293 Other financial institutions** 1,325 10,206 11,531 1,113 5,447 6,560 Total 16,880 271,948 288,828 17,169 208,818 225,987 232 Add accrued interest receivables - 651 651 - 558 558 Less allowance for doubtful accounts - (163) (163) - (107) (107) Total domestic items 16,880 272,436 289,316 17,169 209,269 226,438

Foreign items: US Dollar 14,244 8,284 22,528 11,668 15,485 27,153 Japanese YEN 537 - 537 452 - 452 Euro 298 - 298 360 15 375 Other currencies 4,037 70 4,107 2,786 125 2,911 Total 19,116 8,354 27,470 15,266 15,625 30,891 Add accrued interest receivables - 14 14 - 7 7 Less allowance for doubtful accounts - (67) (67) - (80) (80) Total foreign items 19,116 8,301 27,417 15,266 15,552 30,818 Total domestic and foreign items 35,996 280,737 316,733 32,435 224,821 257,256

* Specialised financial institutions represent financial institutions which operate under specific development mandates such as the Small and Medium Enterprise Development Bank of Thailand, Bank for Agriculture and Agricultural Co-operatives, Export-Import Bank of Thailand, Government Savings Banks, Government Housings Bank, Islamic Bank of Thailand and Secondary Mortgage Corporation but excluding the Small Business Credit Guarantee Corporation ** Other financial institutions represent financial institutions which have a license to offer interest on loans under the Finance Institution Act and, excluding those itemised separately above, such as Finance companies, Securities companies, Credit foncier companies, Life insurance companies, Cooperatives, the Federation of Savings and Credit Cooperatives of Thailand Limited and the Credit Union League of Thailand Limited

170-304 NEW_M5.indd 232 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 2016 Demand Time Total Demand Time Total

Domestic items: Bank of Thailand and Financial Institutions Development Fund 13,731 241,439 255,170 14,667 181,545 196,212 Commercial banks 1,602 11,553 13,155 922 10,738 11,660 Specialised financial institutions* - - - - 3,293 3,293 Other financial institutions** 1,325 11,706 13,031 1,113 5,447 6,560 Total 16,658 264,698 281,356 16,702 201,023 217,725 Add accrued interest receivables - 72 72 - 38 38 Less allowance for doubtful accounts - (163) (163) - (107) (107) Total domestic items 16,658 264,607 281,265 16,702 200,954 217,656 233

Foreign items:

US Dollar 11,926 5,424 17,350 8,995 13,589 22,584 Japanese YEN 537 - 537 452 - 452 Euro 298 - 298 360 15 375 Other currencies 4,019 70 4,089 2,783 125 2,908 Total 16,780 5,494 22,274 12,590 13,729 26,319 Add accrued interest receivables - 5 5 - 7 7 Less allowance for doubtful accounts - (67) (67) - (80) (80) Total foreign items 16,780 5,432 22,212 12,590 13,656 26,246 Total domestic and foreign items 33,438 270,039 303,477 29,292 214,610 243,902

* Specialised financial institutions represent financial institutions which operate under specific development mandates such as the Small and

Medium Enterprise Development Bank of Thailand, Bank for Agriculture and Agricultural Co-operatives, Export-Import Bank of Thailand,

Government Savings Banks, Government Housings Bank, Islamic Bank of Thailand and Secondary Mortgage Corporation but excluding the

Small Business Credit Guarantee Corporation

** Other financial institutions represent financial institutions which have a license to offer interest on loans under the Finance Institution

Act and, excluding those itemised separately above, such as Finance companies, Securities companies, Credit foncier companies, Life

insurance companies, Cooperatives, the Federation of Savings and Credit Cooperatives of Thailand Limited and the Credit Union League

of Thailand Limited

170-304 NEW_M5.indd 233 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

8 Derivatives

Financial derivatives are financial instruments whose characteristics are derived from fair value of underlying assets, or from interest and exchange rates or indices. The following derivatives are used by the Bank:

1 Forward exchange contracts which are agreements to buy or sell fixed amounts of currency at agreed rates of exchange on a specified future date.

2 Currency and interest rate swaps which are agreements to exchange, and on termination of the swap, re-exchange principal amounts denominated in different currencies and may also involve the exchange of related interest payments.

3 Interest rate swaps which are agreements that involve the exchange of interest obligations for a specified period without exchanging the underlying or notional principal.

4 Equity derivatives which are agreements that determined values based on level of the underlying equity’s price or

234 price of equity group or Equity Index.

5 Credit derivatives which are agreements to buy or sell guarantees of credit risk related to the ability to repay underlying assets.

6 Commodity derivatives which are a purchase or a sale of an underlying product or the exchange of cash flow calculated from a reference volume of product multiplied by the agreed price within a period of time and conditions as agreed in the contract.

The Bank has implemented policies to manage the foreign exchange risk and interest rate risk arising from the volatility of foreign exchange rates and interest rates by using derivatives for serving the client’s needs as well as the Bank’s assets and liabilities management needs. The Bank controls the counterparty risks by setting-up the credit limits, and controls the market risk by setting-up limits for management action triggers, net open position, basis point value, value at risk and management stress triggers.

The total notional amount of the derivatives at the year end does not represent the risk exposure arising from derivative transactions. The risks arising from derivatives will depend on the changes in the price of each derivative type before maturity of the contract.

170-304 NEW_M5.indd 234 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

As at 31 December 2017 and 2016, the notional amount of derivatives was as follows:

(in million Baht) Consolidated 2017 Notional amount Less than Within More than 1 year 1 - 5 years 5 years Total

Forward exchange contracts 1,239,306 20,297 13,128 1,272,731 Currency swap contracts 174,908 282,595 164,862 622,365 Interest rate swap contracts 547,982 1,180,473 356,081 2,084,536 Equity derivatives 4,648 7,257 - 11,905 Commodity derivatives 706 - - 706

235 (in million Baht) Consolidated 2016 Notional amount Less than Within More than 1 year 1 - 5 years 5 years Total

Forward exchange contracts 1,197,917 16,364 16,706 1,230,987 Currency swap contracts 95,183 337,919 245,671 678,773 Interest rate swap contracts 466,192 1,114,235 376,037 1,956,464 Equity derivatives 3,784 260 - 4,044 Commodity derivatives 104 - - 104

170-304 NEW_M5.indd 235 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 Notional amount Less than Within More than 1 year 1 - 5 years 5 years Total

Forward exchange contracts 1,239,138 20,297 13,128 1,272,563 Currency swap contracts 174,908 289,152 166,933 630,993 Interest rate swap contracts 547,282 1,170,472 356,982 2,074,736 Equity derivatives 7,171 7,257 - 14,428 Commodity derivatives 706 - - 706

(in million Baht)

The Bank 236 2016 Notional amount Less than Within More than 1 year 1 - 5 years 5 years Total

Forward exchange contracts 1,199,494 16,364 16,706 1,232,564 Currency swap contracts 95,541 339,897 253,244 688,682 Interest rate swap contracts 466,192 1,114,235 376,487 1,956,914 Equity derivatives 5,816 519 - 6,335 Commodity derivatives 104 - - 104

170-304 NEW_M5.indd 236 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

8.1 Trading book derivatives

As at 31 December 2017 and 2016, carrying amount and notional amount classified by type of risk were as follows:

(in million Baht) Consolidated 2017 2016 Carrying amount Notional Carrying amount Notional Type of risk Assets Liabilities amount Assets Liabilities amount

Foreign exchange rate 26,362 24,526 1,761,757 36,637 37,520 1,807,039 Interest rate 15,749 14,398 2,002,122 19,056 15,675 1,858,306 Equity derivatives 135 5,741 11,905 40 296 4,044 Commodity derivatives 60 61 706 7 7 104 Total 42,306 44,726 3,776,490 55,740 53,498 3,669,493

237

(in million Baht) The Bank 2017 2016 Carrying amount Notional Carrying amount Notional Type of risk Assets Liabilities amount Assets Liabilities amount

Foreign exchange rate 26,728 27,519 1,770,217 37,372 37,485 1,818,525 Interest rate 15,583 14,351 1,992,322 19,056 15,675 1,858,756 Equity derivatives 2,471 2,432 14,428 349 277 6,335 Commodity derivatives 60 61 706 7 7 104 Total 44,842 44,363 3,777,673 56,784 53,444 3,683,720

170-304 NEW_M5.indd 237 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

8.2 Banking book derivatives

As at 31 December 2017 and 2016, carrying amount and notional amount classified by type of risk were as follows:

(in million Baht) Consolidated 2017 2016 Carrying amount Notional Carrying amount Notional Type of risk Assets Liabilities amount Assets Liabilities amount

Foreign exchange rate 1,193 258 133,339 2,851 694 102,721 Interest rate (1) 189 31 82,414 92 18 98,158 Total 1,382 289 215,753 2,943 712 200,879

(in million Baht) 238 The Bank 2017 2016 Carrying amount Notional Carrying amount Notional Type of risk Assets Liabilities amount Assets Liabilities amount

Foreign exchange rate 1,193 258 133,339 2,851 694 102,721 Interest rate (1) 189 31 82,414 92 18 98,158 Total 1,382 289 215,753 2,943 712 200,879

(1) Carrying amount at the end of the year for interest rate swap contracts held for banking book are accrued interest receivables or payables based on the contracts. Accrued interest receivables are presented as a part of “Other assets” and accrued interest payables are presented

as a part of “Other liabilities” in the consolidated and the Bank’s financial statements.

The carrying amount of derivative assets and liabilities for trading book derivatives is based on fair value and banking book derivatives is based on an accrual basis in accordance with the accounting policy disclosed in note 3.25.

170-304 NEW_M5.indd 238 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

As at 31 December 2017 and 2016, the proportions, determined based on the notional amount of derivatives contracts divided by type of counterparty were as follows: (%) Consolidated The Bank 2017 2016 2017 2016

Counterparty Financial institutions 79.97 74.41 79.64 74.07 Affiliated companies - - 0.44 0.46 Third parties 20.03 25.59 19.92 25.47

9 Investments, net

9.1 Classification of investments in securities

As at 31 December 2017 and 2016, the investments in securities of the Bank and its subsidiaries were classified as follows: 239 (in million Baht) Consolidated The Bank 2017 2016 2017 2016 Fair value Fair value Fair value Fair value

Trading securities Government and state enterprise securities 9,089 27,291 9,063 27,269 Corporate debt securities 38 23 38 23 Domestic equity securities 7,066 1,562 - - Total 16,193 28,876 9,101 27,292

(in million Baht) Consolidated The Bank 2017 2016 2017 2016 Fair value Fair value Fair value Fair value

Available-for-sale securities Government and state enterprise securities 362,079 347,394 265,702 289,548 Corporate debt securities 37,224 31,952 - - Foreign debt securities 10,898 35,752 2,681 24,372 Domestic equity securities 20,248 19,292 6,867 6,817 Foreign equity securities 1,615 4,083 1,615 1,065 Total 432,064 438,473 276,865 321,802

170-304 NEW_M5.indd 239 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Consolidated The Bank 2017 2016 2017 2016 Cost / Cost / Cost / Cost / Amortised Amortised Amortised Amortised cost cost cost cost

Held-to-maturity securities

Government and state enterprise securities 119,125 120,589 10,992 12,215 Corporate debt securities 36 36 399 423 Foreign debt securities 246 277 246 277 Other securities 1,300 1,300 - - Total 120,707 122,202 11,637 12,915 Less allowance for impairment (36) (36) - -

240 Total 120,671 122,166 11,637 12,915

(in million Baht) Consolidated The Bank 2017 2016 2017 2016 Cost Cost Cost Cost

General investments

Domestic non-marketable equity securities 1,092 934 1,079 928 Foreign non-marketable equity securities 532 319 532 319 Total 1,624 1,253 1,611 1,247 Less allowance for impairment (181) (181) (181) (180) Total 1,443 1,072 1,430 1,067

Total investments, net 570,371 590,587 299,033 363,076

170-304 NEW_M5.indd 240 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

9.2 Unrealised gains (losses) on available-for-sale securities and held-to-maturity securities

As at 31 December 2017 and 2016, unrealised gains (losses) on available-for-sale securities and held-to-maturity securities were as follows: (in million Baht) Consolidated 2017 2016 Amortised Unrealised Unrealised Amortised Unrealised Unrealised Type of securities cost gains losses Fair value cost gains losses Fair value

Available-for-sale securities 424,496* 9,201 (1,633) 432,064 437,566* 5,484 (4,577) 438,473 Held-to-maturity securities 120,671* 13,739 (6) 134,404 122,166* 11,602 - 133,768 Total 545,167 22,940 (1,639) 566,468 559,732 17,086 (4,577) 572,241

* Net of allowance for impairment (in million Baht) 241 The Bank 2017 2016 Amortised Unrealised Unrealised Amortised Unrealised Unrealised Type of securities cost gains losses Fair value cost gains losses Fair value

Available-for-sale securities 273,496* 3,412 (43) 276,865 319,721* 2,645 (564) 321,802 Held-to-maturity securities 11,637* 1,112 - 12,749 12,915* 1,083 - 13,998 Total 285,133 4,524 (43) 289,614 332,636 3,728 (564) 335,800

* Net of allowance for impairment

9.3 Investments in companies with holding of 10% and upwards

As at 31 December 2017 and 2016, investments in mutual funds and financial services companies as well as other companies, other than subsidiaries and associate, of which the Bank and its subsidiaries hold 10% or more of the fund or the paid-up capital in each company, classified by industry, were as follows: (in million Baht) Consolidated The Bank Number of companies 2017 2016 2017 2016

Mutual funds and financial services 2 - - - - Others 6 - 9 226 76 226 76 226 76 226 76

170-304 NEW_M5.indd 241 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

9.4 Investments in companies with problems in their financial positions

As at 31 December 2017, the Bank and its subsidiaries held investments in a number of securities issued by companies with problems in their financial positions and operating results. The Bank and its subsidiaries have made a provision for diminution in the value of securities equal to the amount by which the cost exceeds the market value of respective securities. The aggregate cost of these securities is Baht 59 million (2016: Baht 59 million).

10 Investments in subsidiaries and associate, net

10.1 Type of investments in subsidiaries and associate

As at 31 December 2017 and 2016, the Bank and its subsidiaries had an investment in associate, net of any impairment provisions, as follows:

Consolidated

242 Direct and indirect Investment value Type of Type of shareholding Cost method Equity method business share 2017 2016 2017 2016 2017 2016 (%) (in million Baht)

Associate Services Supernap (Thailand) Co., Ltd.* Data center Common - 24.9 - 351 - 334 Less allowance for impairment - (17) - - Total investments in associate, net - 334 - 334

* The Bank has lost significant influence from investments in associate to general investments due to the partial disposal in 2nd quarter of 2017, so the remaining shareholding is at 10%. Accordingly the investment is no longer classified as an associate.

170-304 NEW_M5.indd 242 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

As at 31 December 2017 and 2016, the Bank had investments in subsidiaries and associate, net of impairment provisions, as follows:

The Bank Direct Investment value Type of shareholding Cost method Type of business share 2017 2016 2017 2016 (%) (in million Baht)

Subsidiaries Finance & Insurance Cambodian Commercial Bank Ltd. Banking Common 100.0 100.0 2,688 1,284 Rutchayothin Assets Management Co., Ltd. Asset management Common 100.0 100.0 25 25 SCB Securities Co., Ltd. Securities Common 100.0 100.0 2,207 2,207 SCB Asset Management Co., Ltd. Asset management Common 100.0 100.0 222 222 Siam Commercial Leasing PCL* Collection Common 99.4 99.4 1,533 1,533 SCB Life Assurance PCL Life insurance Common 99.2 99.2 12,540 12,540 Services 243 SCB Training Centre Co., Ltd. Training center Common 100.0 100.0 390 390 Siam Phitiwat Co., Ltd.* Appraisal services Common 100.0 100.0 10 10 SCB Plus Co., Ltd. Collection Common 100.0 100.0 1 1 SCB Protect Co., Ltd. ** Non-life insurance broker Common 100.0 - 2 - SCB Abacus Co., Ltd. ** Data analytics Common 100.0 - 10 - Other Sor. Or. Kor. PCL* Commercial Common 99.7 99.7 583 583 Indirect subsidiaries Mahisorn Co., Ltd.*** Property management Common - - - - Digital Ventures Co., Ltd.**** Venture capital Common - - - - Associate Services Supernap (Thailand) Co., Ltd. ***** Data center Common - 10.0 - 141 Total 20,211 18,936 Less allowance for impairment (2,194) (2,194) Total investments in subsidiaries and associate, net 18,017 16,742

* The Company is under liquidation ** Newly established in 2017 *** Subsidiary of SCB Plus Co., Ltd. (100% shareholding) **** Subsidiary of SCB Securities Co., Ltd. (100% shareholding) ***** The Bank has lost significant influence from investments in associate to general investments due to the partial disposal in 2nd quarter of 2017. Accordingly the investment is no longer classified as an associate.

All subsidiaries and associate were registered and operate in Thailand except for the Cambodian Commercial Bank Ltd., which is registered and operate in Cambodia.

170-304 NEW_M5.indd 243 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

10.2 The summarised financial information of the associate was as follows:

(in million Baht) 2017 2016 (Unaudited) (Audited) Total Total Total Total assets liabilities Equity assets liabilities Equity

Services* 4,181 2,878 1,303 3,736 2,415 1,321 4,181 2,878 1,303 3,736 2,415 1,321

(in million Baht) For the year ended 31 December 2017 2016 (Unaudited) (Audited) 244 Revenue Expenses Net loss Revenue Expenses Net loss

Services* 27 45 (18) 6 69 (63) 27 45 (18) 6 69 (63)

(in million Baht) Supernap (Thailand) Co., Ltd. For the year ended 31 December 2017 2016

Carrying amount of interests in associate Group’s share of: - Loss from continuing operations (9) (11) - Total comprehensive loss (9) (11)

* The Bank has lost significant influence from investments in associate to general investments due to the partial disposal in 2nd quarter of

2017. Accordingly the investment is no longer classified as an associate.

As at 31 December 2017 and 2016, the Bank and a subsidiary have equity securities in companies received as a result of troubled debt restructuring, which represent more than 20% of the paid-up capital of each company. The Bank did not record these securities as investments in subsidiaries and associates. These investments were in Siam Media and Communication Co., Ltd. and SG Star Property Co., Ltd. Their financial statements have reported balances which do not have a material impact on the Bank’s financial statements.

170-304 NEW_M5.indd 244 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

10.3 Interest in unconsolidated structured entity arising in the normal course of business

The Bank and its asset management subsidiary have transactions with unconsolidated structured entities, through various activities such as involvement in the establishment process, fund management, acting as the trustee, as well as providing source of funds. These structured entities are normally in the form of mutual funds.

The provision of funds is in the form of loans which are on normal business terms. These loans are managed in the same way as all other loans. The outstanding loans to these structured entities as of 31 December 2017 and 2016 amounted to Baht 6,184 million and Baht 6,037 million, respectively.

11 Loans to customers and accrued interest receivables, net

11.1 Classified by product as at 31 December 2017 and 2016

(in million Baht) Consolidated The Bank 245 2017 2016 2017 2016

Overdrafts 101,065 103,864 100,536 103,217 Loans 1,401,337 1,349,447 1,389,019 1,338,845 Bills 297,401 268,031 297,401 268,031 Finance leases 204,877 191,971 204,877 191,971 Others 55,268 49,292 54,449 48,758 Less deferred revenue (25,216) (23,557) (25,216) (23,557) Total loans to customers, net 2,034,732 1,939,048 2,021,066 1,927,265 Add accrued interest receivables 3,328 4,128 2,964 3,505 Total loans to customers and accrued interest receivables, net 2,038,060 1,943,176 2,024,030 1,930,770 Less allowance for doubtful accounts – allowance established per BoT regulations. – Individual approach (46,752) (44,063) (45,998) (43,339) – Collective approach (6,767) (6,569) (6,767) (6,569) – allowance established in excess of BoT minimum regulations (32,180) (22,721) (32,171) (22,716) Less revaluation allowance for debt restructuring (4,291) (4,004) (4,291) (4,004) Total 1,948,070 1,865,819 1,934,803 1,854,142

170-304 NEW_M5.indd 245 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

11.2 Classified by currency and residential status of customers as at 31 December 2017 and 2016

(in million Baht) Consolidated 2017 2016 Domestic Foreign Total Domestic Foreign Total

Baht 1,892,701 24,980 1,917,681 1,795,790 26,187 1,821,977 US Dollar 42,333 56,027 98,360 39,234 62,923 102,157 Other currencies 6,812 11,879 18,691 1,289 13,625 14,914 Total 2,034,732 1,939,048

(in million Baht) The Bank

246 2017 2016 Domestic Foreign Total Domestic Foreign Total

Baht 1,881,593 24,980 1,906,573 1,786,916 26,187 1,813,103 US Dollar 42,333 53,469 95,802 39,234 60,014 99,248 Other currencies 6,812 11,879 18,691 1,289 13,625 14,914 Total 2,021,066 1,927,265

170-304 NEW_M5.indd 246 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

11.3 Classified by business type and quality of loan classification as at 31 December 2017 and 2016

(in million Baht) Consolidated 2017 2016 Special Sub- Doubtful Special Sub- Doubtful Normal Mention Standard Doubtful Loss Total* Normal Mention Standard Doubtful Loss Total*

Agriculture and mining 16,625 2,290 336 124 179 19,554 14,676 170 86 62 172 15,166 Manufacturing and

commercial 565,471 16,976 5,043 3,684 21,559 612,733 558,665 16,628 8,287 3,709 18,061 605,350 Real estate and

construction 140,789 3,210 952 655 3,517 149,123 125,456 2,201 1,543 882 2,673 132,755

Utilities and services 338,868 1,493 1,023 1,209 3,701 346,294 319,793 610 2,481 626 1,776 325,286

Housing loans 514,815 12,329 6,042 5,649 3,729 542,564 500,840 10,672 4,736 3,128 2,493 521,869

Others 340,964 15,342 3,718 2,108 2,332 364,464 317,525 14,219 3,541 1,300 2,037 338,622 247 Total * 1,917,532 51,640 17,114 13,429 35,017 2,034,732 1,836,955 44,500 20,674 9,707 27,212 1,939,048

* Net of deferred revenue, excludes accrued interest receivables (in million Baht) The Bank 2017 2016 Special Sub- Doubtful Special Sub- Doubtful Normal Mention Standard Doubtful Loss Total* Normal Mention Standard Doubtful Loss Total*

Agriculture and mining 16,571 2,290 336 124 179 19,500 14,621 170 86 62 172 15,111 Manufacturing and

commercial 563,091 16,976 5,043 3,684 21,559 610,353 556,043 16,628 8,287 3,709 18,061 602,728 Real estate and

construction 140,786 3,210 952 655 2,553 148,156 125,456 2,201 1,543 882 1,683 131,765

Utilities and services 338,798 1,493 1,023 1,209 3,701 346,224 319,608 610 2,481 626 1,776 325,101

Housing loans 514,764 12,329 6,042 5,649 3,729 542,513 500,794 10,672 4,736 3,128 2,493 521,823

Others 330,879 15,342 3,718 2,108 2,273 354,320 309,699 14,219 3,541 1,300 1,978 330,737 Total * 1,904,889 51,640 17,114 13,429 33,994 2,021,066 1,826,221 44,500 20,674 9,707 26,163 1,927,265

* Net of deferred revenue, excludes accrued interest receivables

170-304 NEW_M5.indd 247 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

11.4 Finance leases

As at 31 December 2017 and 2016, the Bank had finance leases as follows: (in million Baht) Consolidated and the Bank 2017 2016 Amount due Amount due Less than Over 5 Less than Over 5 1 year 1-5 years years Total 1 year 1-5 years years Total

Total of gross investments in the lease 58,153 140,118 6,606 204,877 57,715 129,122 5,134 191,971 Less deferred revenue (24,997) (23,350) Present value of the lease payments 179,880 168,621 Allowance for doubtful accounts (6,767) (6,569) Finance leases, net 173,113 162,052 248

11.5 Loans to listed companies identified for delisting

Consolidated and the Bank 2017 2016 Loans and Loans and accrued accrued No. of interest Amount of No. of interest Amount of companies receivables* Collateral provision companies receivables* Collateral provision (in million Baht) (in million Baht)

Listed companies identified for delisting 2 12,045 5,914 9,771 4 12,724 5,914 8,721

* Including loans to financial institutions but excluding other expenses

170-304 NEW_M5.indd 248 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

11.6 Non-Performing Loans

As at 31 December 2017 and 2016, the Bank used the guidelines specified in the BoT’s notification dated 10 June 2016 in determining Non-Performing Loans which consist of loans classified as sub-standard, doubtful, doubtful loss and loss under the BoT’s guideline. The amounts were as follows: (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Non-Performing Loans (net of allowance for doubtful accounts) 35,592 29,309 35,289 28,949 % of Non-Performing Loans to total loans (net) 1.6 1.4 1.6 1.4 Non-Performing Loans (gross) 65,560 57,593 64,537 56,544 % of Non-Performing Loans to total loans 2.8 2.7 2.8 2.6

As at 31 December 2017, Rutchayothin Assets Management Co., Ltd. which is a subsidiary of the Bank, had Non-Performing

Loans of Baht 433 million (2016: Baht 459 million). However, the Non-Performing Loans based on principal of loan 249 purchased from the Bank and its subsidiaries as at 31 December 2017 was Baht 964 million (2016: Baht 990 million).

11.7 Non-accrual loans

Non-accrual loans, gross, (including loans to financial institutions) as at 31 December 2017 and 2016 were as follows:

(in million Baht) Consolidated The Bank 2017 2016 2017 2016

Loans where recognition of income has been suspended* 57,988 55,129 56,958 54,074 % of loans where recognition of income has been suspended 2.5 2.6 2.5 2.5

* Non-accrual loans as announced by the Notification of the Bank of Thailand number Sor Nor Sor 20/2558

170-304 NEW_M5.indd 249 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

11.8 Classified assets

The Bank and its subsidiaries had classified assets as at 31 December 2017 and 2016 as follows: (in million Baht) Consolidated 2017 Loans and Loans to accrued financial institutions interest and accrued Properties Other receivables* interest receivables Investments for sale assets Total

Normal 1,920,725 281,672 - - 16 2,202,413 Special Mention 51,721 - - - 4 51,725 Sub-Standard 17,161 - - - 3 17,164 Doubtful 13,429 - - - 6 13,435

250 Doubtful Loss 35,024 - 2,051 444 1,096 38,615 2,038,060 281,672 2,051 444 1,125 2,323,352

* Net of deferred revenue (in million Baht) Consolidated 2016 Loans and Loans to accrued financial institutions interest and accrued Properties Other receivables* interest receivables Investments for sale assets Total

Normal 1,840,936 217,558 - - 20 2,058,514 Special Mention 44,618 - - - 2 44,620 Sub-Standard 20,698 - - - 17 20,715 Doubtful 9,707 - - - 5 9,712 Doubtful Loss 27,217 - 6,663 635 569 35,084 1,943,176 217,558 6,663 635 613 2,168,645

* Net of deferred revenue

170-304 NEW_M5.indd 250 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 Loans and Loans to accrued financial institutions interest and accrued Properties Other receivables* interest receivables Investments for sale assets Total

Normal 1,907,725 274,343 - - 16 2,182,084 Special Mention 51,721 - - - 4 51,725 Sub-Standard 17,161 - - - 3 17,164 Doubtful 13,429 - - - 6 13,435 Doubtful Loss 33,994 - 2,550 441 1,073 38,058 2,024,030 274,343 2,550 441 1,102 2,302,466

* Net of deferred revenue 251 (in million Baht) The Bank 2016 Loans and Loans to accrued financial institutions interest and accrued Properties Other receivables* interest receivables Investments for sale assets Total

Normal 1,829,584 209,733 - - 20 2,039,337 Special Mention 44,618 - - - 2 44,620 Sub-Standard 20,698 - - - 17 20,715 Doubtful 9,707 - - - 5 9,712 Doubtful Loss 26,163 - 4,762 632 455 32,012 1,930,770 209,733 4,762 632 499 2,146,396

* Net of deferred revenue

170-304 NEW_M5.indd 251 12/3/61 15:17 ANNUAL REPORT 2017 3,225 4,163 7,961 Total 19,964 53,519 32,180 18,206 85,699

308 783 473 2,791 2,412 6,767 Allowance for doubtful for accounts***

(in million Baht) million (in 622 939 (Finance leases) (Finance 1,704 10,299 Collective approach Collective 166,316 179,880 Loans and Loans receivables accruedinterest

813 3,855 7,488 17,173 46,752 17,423 Allowance 2017 for doubtful for accounts*** Consolidated

1 2

100 100 100

252 allowance setting the setting % used for

Individual approach Individual

3,855** 7,488** 17,423** 40,650* 1,727,479* Net amount Net allowance for allowance 1,796,895 (All loans except for finance leases) finance for except loans (All used to set the set to used doubtful accounts doubtful

(in million Baht) million (in

41,422 12,807 33,320 16,222 1,754,409 1,858,180 Loans and Loans receivables accruedinterest

Loans classified by quality as at 31 December 2017 and 2016 (inclusive of accrued interest receivables)

Allowance for doubtful accounts doubtful for Allowance 11.9.1 Net of cash and near cash collateralcash near and cash of Net collateralof sale including receivables loan from cashflow PV of Net restructuringdebt troubled for allowance revaluation Excluding

Normal Mention Special Sub-Standard Doubtful Loss Doubtful

- - regulations BoT of allowance Minimum - Total regulations BoT of excess in established Allowance Total * ** *** NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For 11.9 - -

170-304 NEW_M5.indd 252 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED Total 3,225 4,163 7,961 3,000 3,000 3,153 3,153 9,654 9,654 22,721 22,721 73,353 Total 19,964 53,519 32,180 18,206 19,184 19,184 50,632 50,632 15,641 15,641 85,699

308 783 473 197 790 450 2,791 2,412 6,767 2,796 2,336 6,569 Allowance Allowance for doubtful for accounts*** for doubtful for accounts***

(in million Baht) million (in (in million Baht) million (in 622 939 416 895 (Finance leases) (Finance (Finance leases) (Finance 1,704 9,626 1,781 Collective approach Collective 10,299 Collective approach Collective 166,316 179,880 155,903 168,621 Loans and Loans receivables Loans and Loans receivables accruedinterest accruedinterest

813 664 3,855 7,488 2,956 9,204 44,063 17,173 46,752 17,423 16,388 14,851 Allowance Allowance 2016 for doubtful for accounts*** 2017 for doubtful for accounts*** Consolidated

Consolidated

1 2 1 2

100 100 100 100 100 100 allowance

setting the setting 253 % used for allowance setting the setting % used for

Individual approach Individual Individual approach Individual

3,855** 7,488** 2,956** 9,204** 17,423** 33,195* 14,851** 40,650* 1,646,674* 1,727,479* Net amount Net allowance for allowance Net amount Net allowance for allowance 1,706,880 (All loans except for finance leases) finance for except loans (All used to set the set to used 1,796,895 (All loans except for finance leases) finance for except loans (All used to set the set to used doubtful accounts doubtful doubtful accounts doubtful

(in million Baht) million (in

9,291 34,992 25,436 19,803 41,422 12,807 33,320 16,222 1,685,033 1,774,555 Loans and Loans 1,754,409 1,858,180 receivables Loans and Loans receivables accruedinterest accruedinterest

Loans classified by quality as at 31 December 2017 and 2016 (inclusive of accrued interest receivables)

Net of cash and near cash collateralcash near and cash of Net collateralof sale including receivables loan from cashflow PV of Net restructuringdebt troubled for allowance revaluation Excluding

Normal Mention Special Sub-Standard Doubtful Loss Doubtful

- - - - Total * ** *** regulations BoT of allowance Minimum - Total regulations BoT of excess in established Allowance - - regulations BoT of allowance Minimum - Total regulations BoT of excess in established Allowance Total * ** *** 11.9 STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For - -

170-304 NEW_M5.indd 253 12/3/61 15:17 ANNUAL REPORT 2017 3,225 4,163 7,961 Total 19,939 17,477 52,765 32,171 84,936

308 783 473 2,791 2,412 6,767 Allowance for doubtful for accounts***

(in million Baht) million (in 622 939 (Finance leases) (Finance 1,704 10,299 Collective approach Collective 166,316 179,880 Loans and Loans receivables accruedinterest

813 3,855 7,488 17,148 16,694 45,998 Allowance 2017 for doubtful for accounts*** The Bank Bank The

1 2

100 100 100 allowance

254 the setting % used for

Individual approach Individual

3,855** 7,488** 16,694** 40,650* 1,783,523 1,714,836* Net amount Net allowance for allowance (All loans except for finance leases) finance for except loans (All used to set the set to used doubtful accounts doubtful

(in million Baht) million (in

12,807 32,290 16,222 41,422 1,741,409 1,844,150 Loans and Loans receivables accruedinterest

Net of cash and near cash collateralcash near and cash of Net collateralof sale including receivables loan from cashflow PV of Net restructuringdebt troubled for allowance revaluation Excluding

Normal Mention Special Sub-Standard Doubtful Loss Doubtful

- - - Total regulations BoT of excess in established Allowance Total regulations BoT of allowance Minimum - * ** *** - NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For

170-304 NEW_M5.indd 254 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED Total 3,000 3,000 3,153 3,153 9,654 9,654 22,716 22,716 72,624 72,624 19,155 19,155 49,908 49,908 14,946 14,946

197 790 450 2,796 2,336 6,569 Allowance for doubtful for accounts***

(in million Baht) million (in 416 895 (Finance leases) (Finance 9,626 1,781 Collective approach Collective 155,903 168,621 Loans and Loans receivables accruedinterest

664 2,956 9,204 16,359 43,339 14,156 Allowance 2016 for doubtful for accounts*** The Bank Bank The

1 2

100 100 100

255 allowance setting the setting % used for

Individual approach Individual

2,956** 9,204** 33,195* 14,156** 1,695,451 1,635,940* Net amount Net allowance for allowance (All loans except for finance leases) finance for except loans (All used to set the set to used doubtful accounts doubtful

(in million Baht) million (in

9,291 34,992 24,382 19,803 1,673,681 1,762,149 Loans and Loans receivables accruedinterest

Net of cash and near cash collateralcash near and cash of Net collateralof sale including receivables loan from cashflow PV of Net restructuringdebt troubled for allowance revaluation Excluding

Normal Mention Special Sub-Standard Doubtful Loss Doubtful

- - - - regulations BoT of allowance Minimum - Total regulations BoT of excess in established Allowance Total * ** *** NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For

170-304 NEW_M5.indd 255 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Following an assessment of the ultimate collectability of the Bank’s consolidated loan portfolio, the management of the Bank and its subsidiaries believe that the allowance for doubtful accounts established was adequate as at 31 December 2017 and 2016 and in compliance with the BoT’s guidelines, including an assessment for “Possible Impaired Loans”, as directed by them. The aggregate allowance is based on both quantitative criteria noted above and qualitative criteria that reflects management judgment.

11.9.2 Changes to the allowance for doubtful accounts

As at 31 December 2017 and 2016, the changes to the allowance for doubtful accounts were as follows:

(in million Baht) Consolidated 2017 Allowance established in excess

256 Special Sub - Doubtful of BoT Normal Mention Standard Doubtful Loss regulations Total

As at 1 January 2017 19,184 3,000 9,654 3,153 15,641 22,721 73,353 Bad debt and doubtful accounts 783 225 (1,693) 1,010 17,640 9,817 27,782 Bad debts written off - - - - (15,075) - (15,075) Others (3) - - - - (358) (361) As at 31 December 2017 19,964 3,225 7,961 4,163 18,206 32,180 85,699

(in million Baht) Consolidated 2016 Allowance established in excess Special Sub - Doubtful of BoT Normal Mention Standard Doubtful Loss regulations Total

As at 1 January 2016 18,150 2,325 14,555 7,987 11,575 9,831 64,423 Bad debt and doubtful accounts 1,034 675 (4,901) (4,834) 15,845 13,334 21,153 Bad debts written off - - - - (11,779) - (11,779) Others - - - - - (444) (444) As at 31 December 2016 19,184 3,000 9,654 3,153 15,641 22,721 73,353

170-304 NEW_M5.indd 256 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 Allowance established in excess Special Sub - Doubtful of BoT Normal Mention Standard Doubtful Loss regulations Total

As at 1 January 2017 19,155 3,000 9,654 3,153 14,946 22,716 72,624 Bad debt and doubtful accounts 784 225 (1,693) 1,010 17,606 9,813 27,745 Bad debts written off - - - - (15,075) - (15,075) Others - - - - - (358) (358) As at 31 December 2017 19,939 3,225 7,961 4,163 17,477 32,171 84,936

(in million Baht) 257 The Bank 2016 Allowance established in excess Special Sub - Doubtful of BoT Normal Mention Standard Doubtful Loss regulations Total

As at 1 January 2016 18,124 2,324 14,555 7,896 10,471 9,817 63,187 Transfer in - 1 - 91 403 10 505 Bad debt and doubtful accounts 1,031 675 (4,901) (4,834) 15,851 13,333 21,155 Bad debts written off - - - - (11,779) - (11,779) Others - - - - - (444) (444) As at 31 December 2016 19,155 3,000 9,654 3,153 14,946 22,716 72,624

170-304 NEW_M5.indd 257 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

12 Troubled debt restructuring

During the years ended 31 December 2017 and 2016, troubled debt restructuring was as follows:

Consolidated and the Bank Outstanding debts Transferred assets Types of debt No. of Before debt After debt restructuring accounts restructuring restructuring Types Fair value 2017 2016 2017 2016 2017 2016 2017 2016 (in million Baht) (in million Baht)

Transfers of assets - 11 - 95 - 94 Immovable - 1 properties Debt restructuring in Immovable various forms 12 15 153 666 124 661 properties - 8

258 Changes of repayment conditions 8,634 12,600 10,954 24,314 10,681 24,307 Total 8,646 12,626 11,107 25,075 10,805 25,062

As at 31 December 2017 and 2016, the Bank and its subsidiaries had outstanding balances relating to troubled debt restructured loans were as follows:

Consolidated and the Bank 2017 2016 No. of Outstanding No. of Outstanding accounts debts accounts debts (in million Baht) (in million Baht)

Restructured loans which were classified as NPL 1,804 8,595 3,047 9,651 Restructured loans which were not classified as NPL 13,307 27,128 14,207 30,839 Total 15,111 35,723 17,254 40,490

170-304 NEW_M5.indd 258 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Supplementary information relating to restructured loans for the years ended 31 December 2017 and 2016 were as follows:

(in million Baht) Consolidated and the Bank 2017 2016

Interest income recognised in the statement of profit or loss and 1,153 1,626 other comprehensive income

Revaluation allowance for debt restructuring

As at 31 December 2017 and 2016, the changes to the revaluation allowance for debt restructuring was as follows:

(in million Baht) Consolidated and the Bank 2017 2016 259 At 1 January 4,004 354 Increase during the year 287 3,650 At 31 December 4,291 4,004

170-304 NEW_M5.indd 259 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

13 Disclosure of the statement of cash flows of the asset management company

In accordance with the BoT’s letter number Sor Nor Sor (01) Wor 3258/2543 dated 27 November 2000, relating to the regulations of the asset management company (AMC), the Bank is required to disclose the statements of cash flows of the AMC in the notes to the financial statements. The statements of cash flows of Rutchayothin Assets Management Co., Ltd. were as follows:

Rutchayothin Assets Management Co., Ltd. Statement of cash flows

(in million Baht) Year ended 31 December 2017 2016 (Unaudited) (Audited)

Cash flows from operating activities

260 Loss from operating before income tax expense (46) (2) Adjustments to reconcile loss from operating before income tax expense

to cash receipts (payments) from operating activities Losses (reversal) of impairment on loans and debt securities 36 (6) Losses on impairment of property for sale 1 - Net interest expenses 7 7 Loss from operating before changes in operating assets and liabilities (2) (1) Decrease in operating assets Intercompany and money market items 6 22 Investments 26 7 Other assets 1 - Decrease in operating liabilities Debt issued and short-term borrowing (31) (27) Accrued expense - (1) Net cash from operating activities - -

Net increase in cash - - Cash at 1 January - -

Cash at 31 December - -

170-304 NEW_M5.indd 260 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

14 Properties for sale, net

As at 31 December 2017 and 2016, the changes to the properties for sale, net were as follows:

(in million Baht) Consolidated 2017 Beginning Disposals/ Ending balance Additions Decreases balance

Foreclosed assets Immovable assets 11,696 1,094 (1,900) 10,890 Movable assets 389 6,451 (6,398) 442 Total 12,085 7,545 (8,298) 11,332 Others 154 659 (417) 396 Total properties for sale 12,239 8,204 (8,715) 11,728 261 Less allowance for impairment (635) - 191 (444) Total properties for sale, net 11,604 8,204 (8,524) 11,284

(in million Baht) Consolidated 2016 Beginning Disposals/ Ending balance Additions Decreases balance

Foreclosed assets Immovable assets 10,798 1,940 (1,042) 11,696 Movable assets 226 7,202 (7,039) 389 Total 11,024 9,142 (8,081) 12,085 Others 131 292 (269) 154 Total properties for sale 11,155 9,434 (8,350) 12,239 Less allowance for impairment (597) (58) 20 (635) Total properties for sale, net 10,558 9,376 (8,330) 11,604

170-304 NEW_M5.indd 261 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 Beginning Disposals/ Ending balance Additions Decreases balance

Foreclosed assets Immovable assets 11,689 1,094 (1,900) 10,883 Movable assets 389 6,451 (6,398) 442 Total 12,078 7,545 (8,298) 11,325 Others 154 659 (417) 396 Total properties for sale 12,232 8,204 (8,715) 11,721 Less allowance for impairment (632) - 191 (441) Total properties for sale, net 11,600 8,204 (8,524) 11,280 262

(in million Baht) The Bank 2016 Beginning Disposals/ Ending balance Additions Decreases balance

Foreclosed assets Immovable assets 10,792 1,937 (1,040) 11,689 Movable assets 225 7,202 (7,038) 389 Total 11,017 9,139 (8,078) 12,078 Others 131 292 (269) 154 Total properties for sale 11,148 9,431 (8,347) 12,232 Less allowance for impairment (594) (58) 20 (632) Total properties for sale, net 10,554 9,373 (8,327) 11,600

The losses on sales of properties for sale recognised in the consolidated profit or loss for the years ended 31 December 2017 and 2016 were Baht 463 million and Baht 484 million respectively, and for the Bank’s profit or loss were Baht 462 million and Baht 482 million, respectively.

170-304 NEW_M5.indd 262 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Immovable assets for sale classified by internal appraisers as at 31 December 2017 and 2016 were as follows:

(in million Baht) Consolidated The Bank 2017 2016 2017 2016

Foreclosed assets Immovable assets Appraised by internal appraisers 10,890 11,696 10,883 11,689 Total 10,890 11,696 10,883 11,689

263

170-304 NEW_M5.indd 263 12/3/61 15:17 ANNUAL REPORT 2017 7,003 5,698 1,451 6,276 Net 13,387 10,349 44,164 balance

(in million Baht) million (in

- - - (17) (339) (176) (146) impairment Allowance for Allowance

- - - (9,018) (2,200) Ending (17,141) (28,359) balance

- - - 1 28 1,244 1,273 Disposals

- - - (465) (345) (1,623) (2,433) Depreciation Accumulated depreciation Accumulated

2017

- - - Consolidated (8,581) (1,856) balance (16,762) (27,199) Beginning

264 9,220 5,844 1,451 Ending 13,387 23,417 19,543 72,862 balance

- - (6) (54) (20) (1,270) (1,350)

Disposals/ Transfer out Transfer

Cost

- - 1 3,377 1,267 1,141 5,786 Additions/ Transfer in Transfer

330 5,849 9,220 68,426 balance 13,387 21,310 18,330 Beginning

Premises and equipment, net net equipment, and Premises Appraisalsubsidiariesits and Bank the for 2015 in completed valuations on based are values

Cost Appraisal* Cost Appraisal *

Land

Premises and building improvements building and Premises Equipment NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For 15 follows: as were net equipment, and premises the to changes the 2016, and 2017 December 31 at As Others Total * the years or loss for ended 31 December 2017 and 2016 amounted to Baht 2,433 million 2,248 million, Depreciation presented in the consolidated profit respectively.

170-304 NEW_M5.indd 264 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED 330 330 9,573 9,573 Net 5,703 7,347 7,347 4,548 4,548 40,888 40,888 balance

13,387

(in million Baht) million (in

- - - (17) (339) (146) (176) impairment Allowance for Allowance

- - - (1,856) (8,581) Ending (27,199) balance (16,762)

- - - - 56 1,491 Disposals

1,547

- - - (367) (409) (1,472) (2,248) Depreciation Accumulated depreciation Accumulated

2016

- - - Consolidated (1,489) (8,228) balance (16,781) (26,498) Beginning

265 330 9,220 5,849 Ending balance 13,387 18,330 21,310 68,426

(5) (9) (48) (66)

(1,484) (3,131) (4,743) Disposals/ Transfer out Transfer

Cost

- - - 736 2,819 2,789 6,344 Additions/ Transfer in Transfer

672 9,225 5,858 13,435 17,660 19,975 66,825 balance Beginning

Appraisalsubsidiariesits and Bank the for 2015 in completed valuations on based are values Cost Appraisal* Cost Appraisal*

Land

Premises and building improvements building and Premises Equipment NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For Others Total * still in use as at 31 December 2017 amounted to Baht 22,954 depreciated premises and equipment that were fully The gross amount of the Bank and its subsidiaries’ million Baht (2016: 22,025 million).

170-304 NEW_M5.indd 265 12/3/61 15:17 ANNUAL REPORT 2017 6,951 5,509 6,095 1,438 Net 12,744 10,154 42,891 balance

(in million Baht) million (in

- - - - (321) (145) (176) impairment Allowance for Allowance

- - - (2,170) (8,628) Ending (16,416) (27,214) balance

- - - - 15 1,177 1,192 Disposals

- - - (341) (439) (1,563) (2,343) Depreciation Accumulated depreciation Accumulated

2017

- - - The Bank The (1,829) balance (8,204) (16,030) (26,063) Beginning

266 9,121 5,654 1,438 Ending 22,511 12,744 18,958 70,426 balance

- - - (1) (39) (1,211) (1,251)

Disposals/ Transfer out Transfer

Cost

- - - 3,312 1,227 1,107 5,646 Additions/ Transfer in Transfer

332 9,121 5,654 12,744 17,770 66,031 balance 20,410 Beginning

Appraisal values are based on valuations completed in 2015 Appraisal2015 in completed valuations on based are values Cost Appraisal* Cost Appraisal*

Land

improvements building and Premises Equipment Others Total * NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For respectively. million, 2,081 Baht and million 2,343 Baht to amounted 2016 and 2017 December 31 ended years the for loss or profit Bank’s the in presented Depreciation

170-304 NEW_M5.indd 266 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

332 Net 5,509 4,380 9,390 7,292 12,744 39,647 39,647 balance

(in million Baht) million (in

- - - - for (145) (176) Allowance impairment

(321)

- - - (8,204) (1,829) Ending balance (16,030) (26,063)

- - - - - (76) (76) in from in Transfer subsidiary

- - - - 1,270 54 Disposals

1,324

- - - Accumulated depreciation Accumulated (388) (363) (1,330) (2,081) Depreciation

- - - 2016 The Bank The (7,870) (1,466) (15,894) (25,230) balance Beginning

267 332 5,654 9,121 Ending 12,744 17,770 balance 20,410 66,031

- - - - 1 79 80 in from in Transfer subsidiary

(8) (5) (64) (48) Cost out (3,130) (1,313) (4,568) Transfer Disposals/

- - -

in 2,785 2,763 6,255 707 Transfer Additions/

676 5,662 9,126 12,792 17,127 18,881 64,264 balance Beginning

Appraisal values are based on valuations completed in 2015 Appraisal2015 in completed valuations on based are values Cost Appraisal* Cost

Land improvements building and Premises Appraisal* Equipment Others Total * million 22,207 Baht to amounted 2017 December 31 at as use in still were that equipment and premises depreciated fully Bank’s the of amount gross The Baht (2016: 21,267 million). determined was external premises and land of value fair The property by independent recent and valuers qualifications appropriate with professional recognised experience in the location and category of the property being The valued. fair value of land and premises was marketdetermined approach by for land the and independent the depreciated valuersreplacement cost using approach for all the premises, of which are categorised as Level 3 in the fair value hierarchy. NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For

170-304 NEW_M5.indd 267 12/3/61 15:17 ANNUAL REPORT 2017 1 4,283 3,688 Net 10,135 18,107 balance

(in million Baht) million (in

- - - (3) (3) impairment Allowance for Allowance

- - (8) (5,789) (5,797) Ending balance

- - - 276 276 Disposals

- - (1) (773) (772) Amortisations Accumulated amortisation Accumulated

2017

- - (7) Consolidated (5,293) (5,300) balance Beginning

268 9 3,688 Ending 10,135 10,075 23,907 balance

- - (7) (542) (535)

Disposals/ Transfer out Transfer

Cost

- 1 3,490 2,050 5,541 Additions/ Transfer in Transfer

8 7,120 1,645 10,135 18,908 balance Beginning

Goodwill and other intangible assets, net assets, intangible other and Goodwill

Goodwill Software licenses Software installation under Software Others Total NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For 16 follows: as were net assets, intangible other and goodwill the to changes the 2016, and 2017 December 31 at As Amortisation the years or loss for ended 31 December 2017 and 2016 amounted to Baht 773 million 599 million, presented in the consolidated profit respectively.

170-304 NEW_M5.indd 268 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED 1 1,733 1,645 Net 10,135 13,514 balance

(in million Baht) million (in

- - - (94) (94) impairment Allowance for Allowance

- - (7) (5,293) (5,300) Ending balance

- - - 39 39 Disposals

- - - (599) (599) Amortisations Accumulated amortisation Accumulated

2016

- - (7) Consolidated (4,733) (4,740) balance Beginning

269 8 7,120 1,645 Ending 10,135 18,908 balance

- - - (51) (51)

Disposals/ Transfer out Transfer

Cost

- - 1,125 1,063 2,188 Additions/ Transfer in Transfer

8 582 6,046 10,135 16,771 balance Beginning

Goodwill Software licenses Software installation under Software Others Total NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For amortised fully million 4,344 Baht to amounted 2017 December 31 at as use in still were that assets subsidiaries’ its and Bank the of amount gross The intangible million) 3,634 Baht (2016:

170-304 NEW_M5.indd 269 12/3/61 15:17 ANNUAL REPORT 2017 1,270 3,936 1,523 1,472 1,270 3,572 8,778 4,265 Net Net balance balance (in million Baht) million (in (in million Baht) million (in

- -

- - (5,371) (5,371) Ending Ending balance balance (4,751) (4,751)

- -

81 81

- - Disposals

(510) (510)

- - Amortisations (701) (701)

Accumulated amortisation Accumulated

- - Amortisations Accumulated amortisation Accumulated

- - (4,241) (4,241) balance Beginning (4,751) (4,751) balance Beginning

2017 2016

The Bank The The Bank The 1,270 1,523 6,223 9,016 1,270 9,307 3,572 Ending balance 14,149 Ending balance

270

- -

- - 466 466 (264) (264)

Disposals/ Disposals/ Transfer out Transfer out Transfer Cost Cost

- 998 1,061 2,059 3,348 2,049 5,397 Additions/ Additions/ Transfer in Transfer in Transfer

804 525 6,223 1,523 1,270 9,016 5,162 6,491 balance balance Beginning Beginning

Goodwill Goodwill licenses Software installation under Software Total licenses Software installation under Software Total NOTES TO THE FINANCIAL STATEMENTS FINANCIAL THE TO NOTES Subsidiaries its and Limited Company Public Bank Commercial Siam The 2017 December 31 ended year the For Amortisation presented or in profit loss the for Bank’s the years ended 31 December 2017 and 2016 amounted to Baht 701 respectively. million and Baht 510 million, million). 3,483 Baht (2016: million 4,222 Baht to amounted 2017 December 31 at as use in still were that assets amortised fully intangible Bank’s the of amount gross The

170-304 NEW_M5.indd 270 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS 1,270 3,936 1,523 1,472 1,270 3,572 8,778 Net Net

balance balance The Siam Commercial Bank Public Company Limited and its Subsidiaries (in million Baht) million (in (in million Baht) million (in

- - - - For the year ended 31 December 2017 Ending Ending balance balance (4,751) (4,751) 4,265 17 Assets pending transfer

- -

81 (5,371) 81 (5,371) As at 31 December 2017 and 2016, assets pending transfer were as follows: - -

Disposals (in million Baht)

(510) (510) Consolidated The Bank - - Amortisations (701) (701) 2017 2016 2017 2016 Accumulated amortisation Accumulated

- - Amortisations Accumulated amortisation Accumulated Pending for E-Banking receivables 1,155 1,076 1,155 1,076

- - (4,241) (4,241) Sundry receivables 621 707 686 778 balance Beginning (4,751) (4,751) Prepayment of option premium - 336 - 336 balance Beginning Others 459 252 459 252

2017 2016

Total 2,235 2,371 2,300 2,442 The Bank The The Bank The 1,270 1,523 6,223 9,016 1,270 9,307 3,572 Ending balance 14,149 Ending balance 18 Other assets, net

271 - - As at 31 December 2017 and 2016, other assets, net were as follows: - - 466 466 (in million Baht) (264) (264)

Disposals/ Disposals/ Consolidated The Bank Transfer out Transfer out Transfer

Cost Cost 2017 2016 2017 2016

- - Collateral per Credit Support Annex 7,115 13,467 7,093 13,467 998 1,061 2,059 3,348 2,049 5,397 Securities business receivables and Additions/ Transfer in Transfer in Transfer receivables from clearing house 7,024 3,168 - -

Prepaid expenses 3,149 3,707 3,075 3,648 Accrued interest on investment and interest rate derivatives 2,025 1,976 650 655 804 525 6,223 1,523 1,270 9,016 5,162 6,491 balance balance

Beginning Additions/ Beginning Net inter-account balance 1,950 666 1,949 666 Accrued service income 1,273 836 1,857 2,175 Receivables from sale of NPL 575 2,564 575 2,564

Others 5,550 4,741 3,202 2,456 Total 28,661 31,125 18,401 25,631

Goodwill Goodwill licenses Software installation under Software Total licenses Software installation under Software Total Amortisation presented or in profit loss the for Bank’s the years ended 31 December 2017 and 2016 amounted to Baht 701 respectively. million and Baht 510 million, million). 3,483 Baht (2016: million 4,222 Baht to amounted 2017 December 31 at as use in still were that assets amortised fully intangible Bank’s the of amount gross The

170-304 NEW_M5.indd 271 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

19 Deposits

19.1 Classified by product as at 31 December 2017 and 2016

(in million Baht) Consolidated The Bank 2017 2016 2017 2016

Demand 78,274 61,585 77,235 60,582 Savings 1,281,892 1,148,768 1,278,583 1,145,554 Fixed - Less than 6 months 164,034 201,141 163,819 200,544 - 6 months and less than 1 year 176,335 392,309 176,331 392,305 - Over 1 year 391,922 222,469 391,922 222,469 Total 2,092,457 2,026,272 2,087,890 2,021,454

272 19.2 Classified by currency and residence of customer as at 31 December 2017 and 2016

(in million Baht) Consolidated 2017 2016 Domestic Foreign Total Domestic Foreign Total

Baht 2,040,698 572 2,041,270 1,954,081 476 1,954,557 US Dollar 35,865 12,243 48,108 59,607 9,406 69,013 Other currencies 2,335 744 3,079 1,553 1,149 2,702 Total 2,078,898 13,559 2,092,457 2,015,241 11,031 2,026,272

(in million Baht) The Bank 2017 2016 Domestic Foreign Total Domestic Foreign Total

Baht 2,041,620 563 2,042,183 1,954,939 459 1,955,398 US Dollar 35,865 6,783 42,648 59,607 3,752 63,359 Other currencies 2,335 724 3,059 1,553 1,144 2,697 Total 2,079,820 8,070 2,087,890 2,016,099 5,355 2,021,454

170-304 NEW_M5.indd 272 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

20 Interbank and money market items (Liabilities)

As at 31 December 2017 and 2016, interbank and money market items (Liabilities) were as follows: (in million Baht) Consolidated 2017 2016 Demand Time Total Demand Time Total

Domestic items: Bank of Thailand and Financial Institutions Development Fund - 1,921 1,921 - 17,830 17,830 Commercial banks 2,688 29,600 32,288 1,541 22,850 24,391 Specialised financial institutions* 99 40,229 40,328 88 32,483 32,571 Other financial institutions** 14,223 8,185 22,408 13,805 7,031 20,836 Total domestic items 17,010 79,935 96,945 15,434 80,194 95,628 273

Foreign items:

US Dollar 406 7,844 8,250 677 1,791 2,468 Euro 271 - 271 247 - 247 Other currencies 2,561 546 3,107 2,610 - 2,610 Total foreign items 3,238 8,390 11,628 3,534 1,791 5,325 Total domestic and foreign items 20,248 88,325 108,573 18,968 81,985 100,953

** Other financial institutions represent financial institutions which have a license to offer interest on loans under the Finance Institution Act and, excluding those itemised separately above, such as Finance companies, Securities companies, Credit foncier companies, Life insurance companies, Cooperatives, the Federation of Savings and Credit Cooperatives of Thailand Limited and the Credit Union League of Thailand

Limited

170-304 NEW_M5.indd 273 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 2016 Demand Time Total Demand Time Total

Domestic items: Bank of Thailand and Financial Institutions Development Fund - 1,921 1,921 - 17,830 17,830 Commercial banks 2,688 29,600 32,288 1,541 22,850 24,391 Specialised financial institutions* 99 40,229 40,328 88 32,483 32,571 Other financial institutions ** 15,590 9,085 24,675 15,987 7,481 23,468 Total domestic items 18,377 80,835 99,212 17,616 80,644 98,260

Foreign items: 274 US Dollar 471 7,844 8,315 853 1,791 2,644 Euro 271 - 271 247 - 247 Other currencies 2,568 546 3,114 2,628 - 2,628 Total foreign items 3,310 8,390 11,700 3,728 1,791 5,519 Total domestic and foreign items 21,687 89,225 110,912 21,344 82,435 103,779

Limited

170-304 NEW_M5.indd 274 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

21 Debt issued and borrowings

As at 31 December 2017 and 2016, debt issued and borrowings were as follows:

Consolidated Year of 2017 2016 Interest rate maturity Domestic Foreign Total Domestic Foreign Total (%) (in million Baht)

Bonds - US Dollar 0 - 3.50 2019 - 2023 715 53,070 53,785 - 65,573 65,573 - Baht - 2020 737 - 737 267 - 267 - Euro - 2018 20 - 20 - - - Subordinated bonds - Baht 4.65 2024 20,000 - 20,000 40,000 - 40,000 Structured notes 275 - Baht 0.27 - 0.75 2018 3,815 - 3,815 914 - 914 Others 181 - 181 84 - 84 Total 25,468 53,070 78,538 41,265 65,573 106,838

The Bank Year of 2017 2016 Interest rate maturity Domestic Foreign Total Domestic Foreign Total (%) (in million Baht)

Bonds - US Dollar 0 - 3.50 2019 - 2023 715 53,727 54,442 - 66,302 66,302 - Baht - 2020 737 - 737 267 - 267 - Euro - 2018 20 - 20 - - - Subordinated bonds - Baht 4.65 2024 20,000 - 20,000 40,000 - 40,000 Others 181 - 181 84 - 84 Total 21,653 53,727 75,380 40,351 66,302 106,653

170-304 NEW_M5.indd 275 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

22 Provisions

As at 31 December 2017 and 2016, provisions were as follows: (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Reserve for pension and gratuity 4,904 4,541 4,527 4,206 Reserve for reward points 2,712 2,579 2,705 2,575 Others 114 342 108 336 Total 7,730 7,462 7,340 7,117

Pension and other post-retirement employee benefits

The Bank and its subsidiaries operate a number of pension and post-retirement benefit plans including both defined 276 contribution plans and defined benefit plans. All defined benefit plans are unfunded.

Present value of unfunded provisions as at 31 December 2017 and 2016 were as follows: (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Severance Payment (SP) benefits scheme 4,041 3,728 3,719 3,445 Other schemes 863 813 808 761 Total present value of unfunded provisions 4,904 4,541 4,527 4,206

170-304 NEW_M5.indd 276 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Movement in the present value of the defined benefit obligations. (in million Baht) Consolidated 2017 2016 SP Others SP Others

At 1 January 3,728 813 3,549 766

Included in profit or loss: Current service cost 346 35 287 34 Interest on obligation 132 29 124 27 478 64 411 61

Others Benefits paid (165) (14) (232) (14)

(165) (14) (232) (14) 277

At 31 December 4,041 863 3,728 813

(in million Baht) The Bank 2017 2016 SP Others SP Others

At 1 January 3,445 761 3,257 718

Included in profit or loss: Current service cost 306 31 252 30 Interest on obligation 122 27 116 25 428 58 368 55

Others Transfer in - - 30 - Benefits paid (154) (11) (210) (12) (154) (11) (180) (12)

At 31 December 3,719 808 3,445 761

170-304 NEW_M5.indd 277 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Actuarial assumptions

The following were the principal actuarial assumptions at the reporting date. (%) Consolidated and the Bank 2017 2016

Discount rate 3.6 3.6 Future salary growth 5.5 - 10.0 5.5 - 10.0 Medical cost trend rate 4.0 - 4.8 4.0 - 4.8 Price inflation rate 3.0 3.0 Gold price inflation rate 3.5 3.5

Assumptions regarding future mortality have been based on published statistics and mortality tables.

278 Sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

(in million Baht) Consolidated The Bank Increase Decrease Increase Decrease

At 31 December 2017 Discount rate (1% movement) (571) 697 (528) 646 Future salary growth (1% movement) 489 (421) 444 (382)

At 31 December 2016 Discount rate (1% movement) (528) 645 (490) 599 Future salary growth (1% movement) 449 (387) 409 (352)

Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.

170-304 NEW_M5.indd 278 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Post-employee benefit expenses included in the statement of profit or loss and other comprehensive income for the years ended 31 December 2017 and 2016 were as follows: (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Recognised in profit or loss:

Defined contribution plans 1,147 1,010 1,025 897 Defined benefit plans 542 472 486 423 Total post-employment benefit expenses 1,689 1,482 1,511 1,320

23 Liabilities under insurance contracts

As at 31 December 2017 and 2016, liabilities under insurance contracts were as follows:

(in million Baht) 279 Consolidated 2017 2016

SCB Life Assurance PCL Long-term technical reserves 247,319 215,958 Short-term technical reserves 926 1,036 Total 248,245 216,994

Liabilities under insurance contract for SCB life Assurance PCL are calculated as described in note 3.28.

170-304 NEW_M5.indd 279 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Long-term technical reserves

(in million Baht) Consolidated 2017 2016

At 1 January 215,958 183,717 Reserve increase from new and inforce policies in the year 43,796 43,720 Reserve released for benefit payments, lapse and cancellation in the year (12,435) (11,479) At 31 December 247,319 215,958

24 Liabilities pending transfer

As at 31 December 2017 and 2016, liabilities pending transfer were as follows: (in million Baht) 280 Consolidated The Bank 2017 2016 2017 2016

Unsettled remittance transaction 6,068 2,047 6,608 2,047 Pending for payment E-banking 4,547 4,354 4,547 4,354 Other payables 2,937 4,802 2,853 4,795 Others 1,064 2,268 1,020 2,232 Total 14,616 13,471 14,488 13,428

170-304 NEW_M5.indd 280 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

25 Other liabilities

As at 31 December 2017 and 2016, other liabilities were as follows: (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Accrued expenses 18,793 19,053 15,730 15,761 Other payable per Credit Support Annex 7,033 9,573 6,949 9,573 Accrued interest payable 4,447 5,014 4,476 5,029 Securities business payables and payables to clearing house 4,172 2,892 - - Withholding tax payable 706 675 583 546 Margin deposits 335 965 311 942 Others 2,320 1,430 1,754 1,084 Total 37,806 39,602 29,803 32,935 281

26 Share capital

All preferred shares had a period of 10 years, which expired on 10 May 2009. Hence, rights of preferred shareholders has been the same as those of the common shareholders since then.

Holders of preferred shares are entitled to convert the shares they hold into common shares, with the conversion ratio of 1:1. The holders of common shares and preferred shares are entitled to receive dividends as declared, and are entitled to one vote per share at the shareholders’ meeting of the Bank.

27 Reserves

Reserves comprise:

Appropriations of profit and/or retained earnings

Legal reserve

Under the Public Companies Act B.E. 2535 Section 116 requires the Bank and its subsidiaries which are public companies shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward (if any), to a reserve account (“legal reserve”), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.

170-304 NEW_M5.indd 281 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

According to the Civil and Commercial Code, subsidiaries which are private companies must appropriate to a reserve fund at each distribution of dividend at least 5% of the profit arising from the business of the Company until the reserve fund reaches 10% of the capital of the Company. Such reserve fund is not available for distribution as dividend.

Other reserves

Fair value changes in available-for-sale investments

The fair value changes in available-for-sale investments account comprises the cumulative net change in the fair value of available-for-sale investments until the investments are derecognised or impaired.

Currency translation differences

The currency translation differences account comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Valuation surplus

The valuation surplus account comprises the cumulative net change in the valuation of premises included in the financial 282 statements at valuation until such premises are sold or otherwise disposed of.

Movements in reserves

Movements in reserves are shown in the statement of changes in equity.

28 Dividends

The Board of Directors Meeting held on 22 August 2017 passed a resolution approving an interim dividend payment in respect of the half-year result of 2017 of Baht 1.50 per share, amounting to Baht 5,099 million. The interim dividend was paid to shareholders on 19 September 2017.

At the annual general meeting of the shareholders of the Bank held on 11 April 2017, the shareholders approved the dividend in respect of the Bank result of the year 2016 at Baht 5.50 per share, amounting to Baht 18,696 million. The interim dividend was paid to shareholders on 16 September 2016 of Baht 1.50 per share amounting to Baht 5,099 million. The remaining dividend of Baht 4.00 per share, amounting to Baht 13,597 million. The remaining dividend was paid to shareholders on 9 May 2017.

At the annual general meeting of the shareholders of the Bank held on 5 April 2016, the shareholders approved the dividend in respect of the Bank result of the year 2015 at Baht 5.50 per share, amounting to Baht 18,696 million. The interim dividend was paid to shareholders on 18 September 2015 of Baht 1.50 per share amounting to Baht 5,099 million. The remaining dividend of Baht 4.00 per share, amounting to Baht 13,597 million. The remaining dividend was paid to shareholders on 3 May 2016.

170-304 NEW_M5.indd 282 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

29 Assets pledged as collateral and under restriction

As at 31 December 2017 and 2016, assets pledged as collateral and under restriction were as follows: (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Government securities pledged for life policy reserve 53,092 43,349 - - Securities pledged as collateral for repurchase 26,179 21,570 26,179 21,570 Others 211 201 156 167 Total 79,482 65,120 26,335 21,737

30 Contingencies

As at 31 December 2017 and 2016, contingencies were as follows: 283 (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Avals to bills 4,195 9,505 4,195 9,505 Guarantees of loans 14,476 19,442 13,757 18,627 Liability under unmatured import bills 6,794 10,403 6,794 10,403 Letters of credit 22,256 24,152 21,779 23,961 Other contingencies - Amount of unused bank overdrafts 179,213 165,963 178,446 165,176 - Other guarantees 176,112 165,493 175,127 164,386 - Receivables / payables from investments 3,232 3,972 3,212 3,474 - Others 28,232 28,562 24,032 23,562 Total 434,510 427,492 427,342 419,094

As at 31 December 2017, the Bank had commitments of Baht 3 million, in connection with finance companies whose operations were closed down permanently by the Ministry of Finance on 8 December 1997 (2016: Baht 3 million).

170-304 NEW_M5.indd 283 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

31 Related parties

For the purposes of these financial statements, parties are considered to be related to the Bank and its subsidiaries if the Bank and its subsidiaries have the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Bank and its subsidiaries and the party are subject to common control or common significant influence. Related parties may be individuals or juristic entities.

The Bank has business transactions with related parties or persons. Interest rate for staff loans under the staff welfare scheme is charged in accordance with the Bank’s regulations for such loans. Interest rate and other pricing for other related parties are at the same rate as in the normal course of business with the same business conditions as general customers. For other income and expenses are charged at market price as normal business or the price as stipulated in the agreement. Transactions with related parties or persons were as follows:

31.1 Loans, deposits, borrowings and contingencies

284 Loans, deposits, borrowings and contingencies to related parties or persons as at 31 December 2017 and 2016 were as follows: (in million Baht) Consolidated 2017 Loans* Deposits Borrowings Contingencies

Related companies (Shareholding through other companies’ debt restructuring process) - - - 1 Major shareholders (more than 10% ownership) - 21,393 - - Entities in which the directors, management or close members of their families have significant influence 7,281 53,693 1,015 2,774 Directors and key executive officers 174 1,434 23 - Total 7,455 76,520 1,038 2,775

* Net of provision (1%)

170-304 NEW_M5.indd 284 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Consolidated 2016 Loans* Deposits Borrowings Contingencies

Associate 1,907 378 - - Related companies (Shareholding through other companies’ debt restructuring process) - - - 2 Major shareholders (more than 10% ownership) - 10,372 - - Entities in which the directors, management or close members of their families have significant influence 12,250 33,103 178 106 Directors and key executive officers 170 1,166 13 - Total 14,327 45,019 191 108

* Net of provision (1%) 285 (in million Baht) The Bank 2017 Investments Loans* Deposits Borrowings Contingencies

Subsidiaries Finance & Insurance 399 1,485 1,930 1,821 17,642 Others - - 165 - - Total subsidiaries 399 1,485 2,095 1,821 17,642

Related companies (Shareholding through other companies’ debt restructuring process) - - - - 1 Major shareholders (more than 10% ownership) - - 21,393 - - Entities in which the directors, management or close members of their families have significant influence - 7,281 53,693 1,015 2,774 Directors and key executive officers - 174 1,434 23 - Total 399 8,940 78,615 2,859 20,417

* Net of provision (1%)

170-304 NEW_M5.indd 285 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2016 Investments Loans* Deposits Borrowings Contingencies

Subsidiaries Finance & Insurance 423 - 2,126 2,140 14,938 Others - - 145 - - Total subsidiaries 423 - 2,271 2,140 14,938

Associate - 1,907 378 - - Related companies (Shareholding through other companies’ debt restructuring process) - - - - 2 Major shareholders (more than 10% ownership) - - 10,372 - - Entities in which the directors, management or 286 close members of their families have significant influence - 12,250 33,103 178 106 Directors and key executive officers - 170 1,166 13 - Total 423 14,327 47,290 2,331 15,046

* Net of provision (1%)

170-304 NEW_M5.indd 286 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

31.2 Income and expenses

Significant income and expenses between the Bank and its subsidiaries, associate and related companies for the years ended 31 December 2017 and 2016 were as follows: (in million Baht) Consolidated 2017 2016 Income Expenses Income Expenses Interest Others Interest Others Interest Others Interest Others

Associate - - - - - 10 6 - Major shareholders - - 206 24 - - 143 23 Entities in which the directors, management or close members of their families have significant 287 influence 205 - 604 65 5 - 88 65 Directors and key executive officers 5 - 10 - 5 - 5 -

(in million Baht) The Bank 2017 2016 Income Expenses Income Expenses Interest Others Interest Others Interest Others Interest Others

Subsidiaries 10 12,487 63 3,475 7 12,617 55 2,702 Associate - - - - - 10 6 - Major shareholders - - 206 24 - - 143 23 Entities in which the directors, management or close members of their families have significant influence 205 - 604 65 5 - 88 65 Directors and key executive officers 5 - 10 - 5 - 5 -

170-304 NEW_M5.indd 287 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

32 Key management personnel compensation

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Bank and its subsidiaries, holding the position of Executive Vice President or higher.

The Bank and its subsidiaries have not paid benefits to directors and executives other than the benefits that are normally paid such as meeting allowances, reward, salary, bonus, cost of living allowance, transportation charges and fringe benefits according to the Bank and its subsidiaries’ regulations.

(in million Baht) Consolidated The Bank For the year ended 31 December 2017 2016 2017 2016

Short-term employee benefits 1,726 1,686 1,422 1,389 Post-employment benefits 24 95 22 93 Total 1,750 1,781 1,444 1,482 288

33 Operating leases

Leases as lessee

The Bank and its subsidiaries lease a number of branch offices rental, foreign exchange booths, ATM rental areas, cars and office equipment under operating lease. The leases typically run for an average period of 5 years, with an option to renew the lease after maturity date.

The rent paid to the lessors are adjusted to market rentals at regular intervals, and the Bank and its subsidiaries do not have an interest in the residual value of the rental assets. As a result, it was determined that substantially all of the risks and rewards of the rental assets are with the lessors.

170-304 NEW_M5.indd 288 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(a) Future minimum lease payments

As at 31 December 2017 and 2016, the future minimum lease payments under non-cancellable leases were payable as follows. (in million Baht) Consolidated The Bank Type of lease Period 2017 2016 2017 2016

Land and/or premises Within 1 year 2,310 2,046 2,143 1,951 1 - 5 years 1,839 1,668 1,692 1,520 Over 5 years 192 219 192 219 Equipment Within 1 year 143 163 143 163 Vehicles Within 1 year 287 214 277 206 1 - 5 years 695 562 672 551 Over 5 years - 80 - 80 289

(b) Amount recognised in profit or loss

(in million Baht) Consolidated The Bank For the year ended 31 December 2017 2016 2017 2016

Lease expense 2,952 2,658 2,973 2,658

34 Operating segments

As at 31 December 2017 and 2016, operating segments were as follows:

Information on the Bank’s operating model and business segments is set out in the annual report. Specifically, the Bank has four main lines of business: the Corporate Segment which serves corporate and commercial customers; the SME Segment which serves SME customers; the Retail Segment which serves individuals and small businesses; and the Special Business Function which is responsible for NPL resolution. In addition, the Bank has three major subsidiaries: SCB Securities Co., Ltd., SCB Asset Management Co., Ltd. and SCB Life Assurance PCL.

170-304 NEW_M5.indd 289 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

In the information provided below, the results of subsidiaries together with the income from the Banks’ interbank and money market and investments, that is not allocated to a specific business unit, are presented under the “Life Insurance” and “Others” column. The results of the Special Business unit are allocated back to the line of business from which the workout assets were transferred. With respect to fee income earned by subsidiaries, it is allocated to the appropriate line of business (Corporate Segment, SME Segment or Retail Segment) in the Management Discussion and Analysis that accompanies the financial statements but is stated under “Life Insurance” and “Others” in the analysis below. Finally, operating expenses are both direct and indirect business expenses of each line of business as well as allocation of common expenses to these businesses.

The Bank has determined that the Chief Operating Decision Maker is the Executive Committee. Financial information of the business segments measured on a basis that is consistent with internal reporting was as follows: (in million Baht) Consolidated For the year ended Corporate SME Retail Life

290 31 December 2017 Segment Segment Segment Insurance Others Elimination Total

Net interest income 15,821 16,183 41,087 9,260 9,959 - 92,310 Non-interest income, net 9,725 3,030 24,543 1,096 12,856 (7,347) 43,903 Total operating income 25,546 19,213 65,630 10,356 22,815 (7,347) 136,213 Total operating expenses (9,229) (5,826) (34,532) (2,470) (9,775) 4,182 (57,650) Profit before impairment loss and income tax 16,317 13,387 31,098 7,886 13,040 (3,165) 78,563

Impairment loss and income tax (35,358) Net profit 43,205

170-304 NEW_M5.indd 290 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Consolidated For the year ended Corporate SME Retail Life 31 December 2016 Segment Segment Segment Insurance Others Elimination Total

Net interest income 15,334 17,238 39,775 8,061 8,041 - 88,449 Non-interest income, net 9,499 3,464 23,912 3,555 11,580 (7,125) 44,885 Total operating income 24,833 20,702 63,687 11,616 19,621 (7,125) 133,334 Total operating expenses (8,663) (5,411) (30,344) (2,671) (8,234) 3,679 (51,644) Profit before impairment loss and income tax 16,170 15,291 33,343 8,945 11,387 (3,446) 81,690

Impairment loss and income tax (34,021) Net profit 47,669

(in million Baht) 291 Consolidated 2017 Corporate SME Retail Life Segment Segment Segment Insurance Others Elimination Total

Loans* 757,777 364,393 898,648 9,324 4,590 - 2,034,732 Total assets 833,987 324,596 863,152 289,506 732,112 (19,321) 3,024,032 Total liabilities 614,101 320,916 1,242,467 253,400 240,488 (11,103) 2,660,269

* Net of deferred revenue

170-304 NEW_M5.indd 291 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Consolidated 2016 Corporate SME Retail Life Segment Segment Segment Insurance Others Elimination Total

Investment in associate - - - - 334 - 334 Loans* 708,683 364,940 856,276 7,351 1,798 - 1,939,048 Total assets 815,971 328,991 822,516 248,340 712,941 (15,771) 2,912,988 Total liabilities 642,788 324,029 1,141,460 223,144 256,412 (9,143) 2,578,690

* Net of deferred revenue

35 The financial position and results of operations classified by domestic and foreign

292 business

35.1 As at 31 December 2017 and 2016, the financial position classified by domestic and foreign business was as follows:

(in million Baht) Consolidated 2017 2016 Domestic Foreign Domestic Foreign business business Elimination Total business business Elimination Total

Total assets 2,995,532 74,545 (46,045) 3,024,032 2,871,639 89,275 (47,926) 2,912,988 Interbank and money market items, net (Assets) 308,218 8,587 (72) 316,733 247,262 10,188 (194) 257,256 Investments, net * 569,284 1,087 - 570,371 587,405 3,516 - 590,921 Loans to customers and accrued interest receivables, net 1,930,702 17,368 - 1,948,070 1,847,244 18,575 - 1,865,819 Deposits 2,079,830 12,627 - 2,092,457 2,015,822 10,450 - 2,026,272 Interbank and money market items (Liabilities) 103,360 5,285 (72) 108,573 99,356 1,791 (194) 100,953 Debt issued and borrowings 25,468 53,070 - 78,538 41,265 65,573 - 106,838

* Includes net investments in subsidiaries and associate

170-304 NEW_M5.indd 292 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 2016 Domestic Foreign Domestic Foreign business business Elimination Total business business Elimination Total

Total assets 2,705,140 66,465 (45,973) 2,725,632 2,627,843 81,295 (47,732) 2,661,406 Interbank and money market items, net (Assets) 300,095 3,382 - 303,477 238,481 5,421 - 243,902 Investments, net * 315,963 1,087 - 317,050 376,302 3,516 - 379,818 Loans to customers and accrued interest receivables, net 1,919,980 14,823 - 1,934,803 1,838,463 15,679 - 1,854,142 Deposits 2,080,752 7,138 - 2,087,890 2,016,678 4,776 - 2,021,454 Interbank and money 293 market items (Liabilities) 105,627 5,285 - 110,912 101,988 1,791 - 103,779 Debt issued and borrowings 21,653 53,727 - 75,380 40,351 66,302 - 106,653

* Includes net investments in subsidiaries and associate

35.2 The results of operations classified by domestic and foreign business for the years ended 31 December 2017 and 2016 were as follows: (in million Baht) Consolidated 2017 2016 Domestic Foreign Domestic Foreign business business Elimination Total business business Elimination Total

Interest income 124,139 3,101 (2,127) 125,113 121,387 3,451 (2,395) 122,443 Interest expenses (31,669) (3,261) 2,127 (32,803) (32,990) (3,399) 2,395 (33,994) Net interest income 92,470 (160) - 92,310 88,397 52 - 88,449 Net fees and service income 30,210 114 - 30,324 28,336 78 - 28,414 Other operating income 13,542 37 - 13,579 16,381 90 - 16,471 Other operating expenses (82,251) (466) - (82,717) (73,870) (302) - (74,172) Profit before income tax 53,971 (475) - 53,496 59,244 (82) - 59,162

170-304 NEW_M5.indd 293 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank 2017 2016 Domestic Foreign Domestic Foreign business business Elimination Total business business Elimination Total

Interest income 114,889 2,869 (2,127) 115,631 113,291 3,248 (2,395) 114,144 Interest expenses (31,661) (3,233) 2,127 (32,767) (32,986) (3,383) 2,395 (33,974) Net interest income 83,228 (364) - 82,864 80,305 (135) - 80,170 Net fees and service income 32,033 54 - 32,087 31,679 17 - 31,696 Other operating income 11,604 21 - 11,625 11,379 76 - 11,455 Other operating expenses (80,107) (367) - (80,474) (71,615) (223) - (71,838) Profit before income tax 46,758 (656) - 46,102 51,748 (265) - 51,483

294 36 Interest income

Interest income included in profit or loss for the years ended 31 December 2017 and 2016 was as follows:

(in million Baht) Consolidated The Bank 2017 2016 2017 2016

Interbank and money market items 5,028 4,206 4,583 3,794 Investments and trading transactions 312 597 312 597 Investments in debt securities 12,873 12,230 4,657 4,831 Loans 95,788 94,844 94,967 94,356 Finance leases 11,024 10,479 11,024 10,479 Others 88 87 88 87 Total 125,113 122,443 115,631 114,144

170-304 NEW_M5.indd 294 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

37 Interest expenses

Interest expenses included in profit or loss for the years ended 31 December 2017 and 2016 was as follows:

(in million Baht) Consolidated The Bank 2017 2016 2017 2016

Deposits 19,006 20,225 18,984 20,220 Interbank and money market items 1,218 1,034 1,245 1,049 Contributions to Deposit Protection Agency 9,419 8,810 9,419 8,810 Debt issued - Debentures 1,957 2,010 1,987 2,039 - Subordinated debentures 1,063 1,835 1,063 1,835 Borrowings 71 59 - - Others 69 21 69 21 295 Total 32,803 33,994 32,767 33,974

38 Net fees and service income

Net fees and service income included in profit or loss for the years ended 31 December 2017 and 2016 was as follows:

(in million Baht) Consolidated The Bank 2017 2016 2017 2016

Fees and service income - Acceptances, avals and guarantees 1,768 1,645 1,752 1,629 - ATM, Debit cards, Credit Cards and other banking electronic 12,355 11,965 12,368 11,980 - Others 22,732 20,769 23,305 23,000 Total fees and service income 36,855 34,379 37,425 36,609 Fees and service expenses (6,531) (5,965) (5,338) (4,913) Net fees and service income 30,324 28,414 32,087 31,696

170-304 NEW_M5.indd 295 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

39 Gains on trading

Gains on trading included in profit or loss for the years ended 31 December 2017 and 2016 was as follows:

(in million Baht) Consolidated The Bank 2017 2016 2017 2016

Gains (losses) on trading - Foreign currencies and foreign currency related derivatives 5,253 5,161 4,983 5,228 - Interest rate related derivatives 1,507 1,223 1,507 1,223 - Debt securities 440 85 353 13 - Equity securities (110) 245 46 83 Total 7,090 6,714 6,889 6,547

296 40 Gains on investments

Gains (losses) on investments included in profit or loss for the years ended 31 December 2017 and 2016 was as follows:

(in million Baht) Consolidated The Bank 2017 2016 2017 2016

Available-for-sale securities 1,634 2,695 536 1,264 Held-to-maturity securities (191) (191) - - General investments 51 2 51 2 Investment in subsidiaries and associate 117 29 117 13 Total 1,611 2,535 704 1,279

170-304 NEW_M5.indd 296 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

41 Impairment loss on loans and debt securities

Impairment loss on loans and debt securities and loss on debt restructuring included in profit or loss for the years ended 31 December 2017 and 2016 were as follows: (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Interbank and money market items 43 (26) 43 (26) Loans to customers * 25,006 18,815 24,969 18,817 Loss on debt restructuring 18 3,739 18 3,739 Total 25,067 22,528 25,030 22,530

* Net of bad debts recovery

42 Income tax 297

Income tax recognised in profit or loss

(in million Baht) Consolidated The Bank For the year ended 31 December 2017 2016 2017 2016

Current tax expense

Current year 10,020 12,081 8,046 9,865

Deferred tax expense

Movements in temporary differences 271 (588) 202 (547) Total income tax expense 10,291 11,493 8,248 9,318

170-304 NEW_M5.indd 297 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Income tax recognised in other comprehensive income

(in million Baht) Consolidated 2017 2016 For the year ended Before Tax Net of Before Tax Net of 31 December Tax expense tax tax benefit tax

Investments 6,080 (1,216) 4,864 (2,641) 531 (2,110) Derivatives 371 (74) 297 (136) 27 (109) Premises and equipment - - - (53) 11 (42) Total 6,451 (1,290) 5,161 (2,830) 569 (2,261)

(in million Baht) The Bank 298 2017 2016 For the year ended Before Tax Net of Before Tax Net of 31 December Tax expense tax tax benefit tax

Investments 717 (144) 573 (122) 24 (98) Derivatives 51 (10) 41 (51) 10 (41) Premises and equipment - - - (53) 11 (42) Total 768 (154) 614 (226) 45 (181)

Reconciliation of effective tax rate

Consolidated 2017 2016 Rate Rate For the year ended 31 December (%) (in million Baht) (%) (in million Baht)

Profit before income tax expense 53,496 59,162

Income tax using the Thai corporation tax rate 20.0 10,699 20.0 11,832 Tax effect of income and expenses that are not taxable income or not deductible in determining taxable profit, net (408) (339) Total 19.2 10,291 19.4 11,493

170-304 NEW_M5.indd 298 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

The Bank 2017 2016 Rate Rate For the year ended 31 December (%) (in million Baht) (%) (in million Baht)

Profit before income tax expense 46,102 51,483

Income tax using the Thai corporation tax rate 20.0 9,220 20.0 10,297 Tax effect of income and expenses that are not taxable income or not deductible in determining taxable profit, net (972) (979) Total 17.9 8,248 18.1 9,318

Income tax reduction

Revenue Code Amendment Act No. 42 B.E. 2559 dated 3 March 2016 grants a reduction of the corporate income tax rate to 20% of net taxable profit for the accounting periods which begins on or after 1 January 2016. 299 Deferred tax

Deferred tax assets and liabilities as at 31 December 2017 and 2016 were as follows: (in million Baht) Consolidated The Bank 2017 2016 2017 2016

Deferred tax assets 111 410 26 8 Deferred tax liabilities (3,590) (2,328) (2,560) (2,186) Net (3,479) (1,918) (2,534) (2,178)

170-304 NEW_M5.indd 299 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

Movements in deferred tax assets and liabilities during for the years ended 31 December 2017 and 2016 were as follows:

(in million Baht) Consolidated (Charged) / Credited to: At Other At 1 January Profit comprehensive 31 December 2017 or loss income 2017

Deferred tax assets

Derivatives assets 71 (29) (10) 32 Investments 451 (2) (426) 23 Investments in subsidiaries and associate 409 - - 409 Loans to customers and accrued interest receivables 624 206 - 830

300 Properties for sale 127 (38) - 89 Premises and equipment 1 - - 1 Other intangible assets 58 (32) - 26 Other assets 421 (318) - 103 Deposits - 10 - 10 Derivatives liabilities 159 (8) (136) 15 Provisions 1,497 50 - 1,547 Liabilities under insurance contracts 44 2 - 46 Other liabilities 722 43 - 765 Total 4,584 (116) (572) 3,896

Deferred tax liabilities

Derivatives assets (177) (5) 72 (110) Investments (803) (93) (790) (1,686) Loans to customers and accrued interest receivables (501) (72) - (573) Premises and equipment (5,001) 12 - (4,989) Other assets (20) 3 - (17) Total (6,502) (155) (718) (7,375) Net (1,918) (271) (1,290) (3,479)

170-304 NEW_M5.indd 300 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) Consolidated (Charged) / Credited to: At Other At 1 January Profit comprehensive 31 December 2016 or loss income 2016

Deferred tax assets

Derivatives assets 130 (69) 10 71 Investments 340 (5) 116 451 Investments in subsidiaries and associate 409 - - 409 Loans to customers and accrued interest receivables 160 464 - 624 Properties for sale 119 8 - 127 Premises and equipment 1 - - 1 301 Other intangible assets 84 (26) - 58 Other assets 317 104 - 421 Derivatives liabilities 279 2 (122) 159 Provisions 1,443 54 - 1,497 Liabilities under insurance contracts 36 8 - 44 Other liabilities 673 49 - 722 Total 3,991 589 4 4,584

Deferred tax liabilities

Derivatives assets (311) (5) 139 (177) Investments (1,206) (12) 415 (803) Loans to customers and accrued interest receivables (449) (52) - (501) Premises and equipment (5,061) 49 11 (5,001) Other intangible assets (16) 16 - - Other assets (23) 3 - (20) Total (7,066) (1) 565 (6,502) Net (3,075) 588 569 (1,918)

170-304 NEW_M5.indd 301 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank (Charged) / Credited to: At Other At 1 January Profit comprehensive 31 December 2017 or loss income 2017

Deferred tax assets

Derivatives assets 71 (29) (10) 32 Investments 113 - (104) 9 Investments in subsidiaries and associate 409 - - 409 Loans to customers and accrued interest receivables 624 206 - 830 Properties for sale 126 (38) - 88 Other intangible assets 50 (24) - 26 302 Other assets 403 (321) - 82 Deposits - 10 - 10 Provisions 1,424 44 - 1,468 Other liabilities 676 27 - 703 Total 3,896 (125) (114) 3,657

Deferred tax liabilities

Investments (695) (19) (40) (754) Loans to customers and accrued interest receivables (501) (72) - (573) Premises and equipment (4,858) 11 - (4,847) Other assets (20) 3 - (17) Total (6,074) (77) (40) (6,191) Net (2,178) (202) (154) (2,534)

170-304 NEW_M5.indd 302 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

(in million Baht) The Bank (Charged) / Credited to: At Other At 1 January Profit comprehensive 31 December 2016 or loss income 2016

Deferred tax assets

Derivatives assets 130 (69) 10 71 Investments 90 - 23 113 Investments in subsidiaries and associate 409 - - 409 Loans to customers and accrued interest receivables 160 464 - 624 Properties for sale 119 7 - 126 303 Other intangible assets 84 (34) - 50 Other assets 300 103 - 403 Provisions 1,375 49 - 1,424 Other liabilities 650 26 - 676 Total 3,317 546 33 3,896

Deferred tax liabilities

Investments (699) 3 1 (695) Loans to customers and accrued interest receivables (449) (52) - (501) Premises and equipment (4,917) 48 11 (4,858) Other assets (22) 2 - (20) Total (6,087) 1 12 (6,074) Net (2,770) 547 45 (2,178)

170-304 NEW_M5.indd 303 12/3/61 15:17 ANNUAL REPORT 2017

NOTES TO THE FINANCIAL STATEMENTS The Siam Commercial Bank Public Company Limited and its Subsidiaries

For the year ended 31 December 2017

43 Basic earnings per share

Basic earnings per share in the consolidated and the Bank’s financial statements for the years ended 31 December 2017 and 2016 were calculated as follows: (in million Baht / million shares) Consolidated The Bank 2017 2016 2017 2016

Profit attributable to common shareholders of the Bank (basic) 43,152 47,612 37,854 42,165

Number of common and preferred shares outstanding 3,399 3,399 3,399 3,399

Earnings per share (basic) (in Baht) 12.69 14.01 11.14 12.40

44 Events after the reporting period

304 On 11 January 2018, the Bank registered the conversion of 4,370 preferred shares to 4,370 common shares with the Ministry of Commerce.

170-304 NEW_M5.indd 304 12/3/61 15:17 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

SUPPLEMENTARY INFORMATION

305

305-352 NEW_M5.indd 305 12/3/61 16:37 ANNUAL REPORT 2017

CAPITAL STRUCTURE

Securities

Registered capital, as of December 31, 2017, stood at shareholders are now the same as Baht 70,000 million and comprised: those of ordinary shareholders. 3,416,174,272 ordinary shares par value 10 Baht Preferred shares can be converted 3,583,825,728 preferred shares par value 10 Baht to ordinary shares in accordance Paid-up capital, as of December 31, 2017, stood at with the conversion schedule and Baht 33,992 million and comprised: procedure specified by the Bank. 3,395,407,226 ordinary shares par value 10 Baht Conversion rate Preferred shares can be converted 3,784,972 preferred shares par value 10 Baht to ordinary shares at the ratio of 1:1. Conversion price None Conversion Every quarter on March 31, June 30, Details of Securities schedule September 30, and December 31 SCB’s securities listed on the Stock Exchange of Thailand (SET) of each year. are as follows: - For conversion on March 31, 1. Ordinary shares request must be submitted during 2. Preferred shares March 16-30. - For conversion on June 30, request 1. Ordinary shares must be submitted during June 15-29. Amount 3,395,407,226 shares as of December - For conversion on September 30, 306 31, 2017 request must be submitted during Issuer The Siam Commercial Bank Public September 15-29. Company Limited - For conversion on December 31, Registrar Thailand Securities Depository request must be submitted during Company Limited December 16-30. Trading Traded on both main board and If a conversion date falls on a bank holiday, foreign board: conversion shall be made on the - Using the symbol SCB on the last business day prior to the bank main board holiday. - Using the symbol SCB-F on the Conversion (1) Conversion request form can foreign board procedure be obtained at Thailand Securities Depository Company Limited or 2. Preferred shares at any securities brokerage. Amount 3,784,972 shares as of December 31, 2017 (2) Conversion request form can Issuer The Siam Commercial Bank be submitted at Thailand Public Company Limited Securities Depository Company Registrar Thailand Securities Depository Limited or at any securities Company Limited brokerage during business hours. Preferred share Preferential rights conferred to (3) Documents required for features preferred shares have a 10-year conversion are: validity from the date of the 1. The Bank’s conversion request initial payment by the Ministry of form; Finance which had reached the 2. Preferred share certificates expiration date on May 10, 2009. or any permissible substitute Therefore, the rights of preferred (as specified by the SET);

305-352 NEW_M5.indd 306 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

3. For an individual, a certified Shareholding through Thai NVDR Co., Ltd (NVDR) copy of valid national identity As of December 29, 2017, the Bank had 3,399,192,198 registered card, foreigner identity card and paid-up shares outstanding, of which 287,206,657 shares or passport (whichever is (or 8.45% of total shares) were held through NVDR. All shares applicable); in NVDR were ordinary shares which accounted for 8.45% For a juristic person, a copy of total ordinary shares. NVDR has announced that it will of juristic person certificate abstain from attending and voting at shareholder meetings, issued by Ministry of Commerce except for the case that involves stock delisting from the within 1 year of the request SET. Investors can obtain the number of the Bank’s shares submission date, together with held through NVDR directly from the Stock Exchange a certified copy of valid of Thailand at www.set.or.th/nvdr. national identity card of a director with signing authority. Note: NVDR, or non-voting depositary receipt, is tradeable Place for requesting (1) Thailand Securities Depository financial instrument with claims on underlying shares listed on the conversion Co., Ltd. or SET. Thai NVDR Company Limited is a juristic person holding shares (2) Brokerage on behalf of foreign investors. This legal structure allows foreign investors to invest in Thai securities without foreign limit restriction. Future Share Issuance Obligation The Bank has no future share issuance obligation. Policy on Rights Issuance 307 The Bank has no plan to issue new shares to existing shareholders.

305-352 NEW_M5.indd 307 12/3/61 16:37 ANNUAL REPORT 2017

Shareholders Principal shareholders (as of December 29, 2017)

Percentage of No. Name Ordinary shares Preferred shares Total shares shares

1 VAYUPAK MUTUAL FUND 1 785,298,200 - 785,298,200 23.10 2 BUREAU OF THE CROWN PROPERTY 666,734,185 - 666,734,185 19.61 AND GROUP 3 THAI NVDR COMPANY LIMITED 287,206,657 - 287,206,657 8.45 4 STATE STREET BANK EUROPE LIMITED 181,467,118 - 181,467,118 5.34 5 His Majesty King Maha Vajiralongkorn 113,274,873 - 113,274,873 3.33 Bodindradebayavarangkun 6 CHASE NOMINEES LIMITED 101,230,148 - 101,230,148 2.98 7 SOCIAL SECURITY OFFICE 67,913,700 - 67,913,700 2.00 8 THE BANK OF NEW YORK MELLON 57,340,400 - 57,340,400 1.69 9 SOUTH EAST ASIA UK (TYPE C) 55,228,449 - 55,228,449 1.62 308 NOMINEES LIMITED 10 NORTRUST NOMINEES LTD-CL AC 39,131,164 - 39,131,164 1.15 11 OTHERS 1,040,582,332 3,784,972 1,044,367,304 30.72

TOTAL PAID-UP CAPITAL 3,395,407,226 3,784,972 3,399,192,198 100.00

THAI SHAREHOLDERS 2,408,166,549 3,569,649 2,411,736,198 70.95 FOREIGN SHAREHOLDERS 987,240,677 215,323 987,456,000 29.05

Note: Ministry of Finance holds 3,071,786 ordinary shares, representing 0.09% of total share capital.

Dividend Policy

SCB Dividend Policy

The Bank has a policy to allocate 30-50% of reported In 2017, the Bank paid dividend at Baht 5.50 per share to consolidated net profits for dividend payment which is payable ordinary and preferred shareholders with the total amount of in any year of positive profits net of all legal reserve and other Baht 18,696 million or 39.3% of the Bank’s 2016 consolidated reserve requirements, provided that there is no accumulated net profits. Dividend payment from the Bank’s 2017 profits will loss and the Bank maintains sufficient capital to meet the be proposed for approval at the Annual General Meeting of legal requirements. Shareholders in April 2018.

305-352 NEW_M5.indd 308 15/3/61 16:35 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Dividend Policies of Subsidiaries

For a subsidiary over which the Bank has full control and is In the case of a subsidiary being a SET-listed company or not listed on the Stock Exchange of Thailand (SET), dividends a company over which the Bank does not have full control, shall be paid at the maximum amount of net profits after dividend payment will depend on the individual company’s appropriation for legal reserves or at an appropriate level dividend policy and shall comply with applicable laws, rules given the subsidiary’s business requirements. and regulations.

Debt Securities

At the end of 2017, outstanding debt securities issued by the Bank were as follows:

Amount Interest rate Maturity Date

Senior Unsecured Notes USD 750 million 3.50% April 2019 309 Senior Unsecured Notes USD 400 million 3.20% July 2022 Senior Unsecured Notes USD 500 million 2.75% May 2023 Subordinated Debenture No. 2/2012* Baht 20 billion 4.65% 2024

* The issuer has the right to early redemption.

305-352 NEW_M5.indd 309 12/3/61 16:37

305-352 NEW_M5.indd 310 NEW_M5.indd 305-352 12/3/61 16:37 12/3/61

Tel: 0-2061-6166 Tel:

Bangrak, Bangkok 10500 Bangkok Bangrak,

96 Narathiwas Ratchanakharin Rd., Silom, Silom, Rd., Ratchanakharin Narathiwas 96

ﬂoor (L2-02), (L2-02), ﬂoor 2 Tower, CUBE Mahanakorn

103,750,000 103,750,000 100.00% 4,000,000 4,000,000 4,000,000 4,000,000 103,750,000 103,750,000 Ordinary Venture capital Venture 8. DIGITAL VENTURES CO.,LTD. CO.,LTD. VENTURES DIGITAL 8.

(2)

Fax 0-2949-1001 Fax

Tel: 0-2949-1000 Tel:

Jatujak, Jatujak, Bangkok 10900 10900 Bangkok Jatujak, Jatujak,

20 Floor, 19 Rutchadaphisek Rd., Rd., Rutchadaphisek 19 Floor, -21

st th

SCB Park Plaza Bldg., Tower 3 East, 2 East, 3 Tower Bldg., Plaza Park SCB , ,

2,207,396,410 2,207,396,410 100.00% 240,000,000 240,000,000 240,000,000 240,000,000 2,100,000,000 2,100,000,000 Ordinary Securities 7. SCB SECURITIES CO., LTD. CO., SECURITIES SCB 7.

Fax 0-2949-1501 Fax

Tel: 0-2949-1500 Tel:

Jatujak, Bangkok 10900 Bangkok Jatujak,

7 Floor, 18 Rutchadaphisek Rd., Jatujak, Jatujak, Rd., Rutchadaphisek 18 Floor, -8

th th

management SCB Park Plaza Bldg., Tower 1 West, West, 1 Tower Bldg., Plaza Park SCB

221,573,983 221,573,983 100.00% 20,000,000 20,000,000 20,000,000 20,000,000 100,000,000 100,000,000 Ordinary Asset Asset 6. SCB ASSET MANAGEMENT CO., LTD. CO., MANAGEMENT ASSET SCB 6.

Fax: 0-2937-5437 Fax:

Tel: 0-2937-5400 Tel:

Bangkok 10900 Bangkok

management 18-19 Rutchadaphisek Rd., Jatujak, Jatujak, Jatujak, Jatujak, Rd., Rutchadaphisek 18-19

(building) Floor, Floor, 2 East, Tower Plaza, Park SCB

88,168,273 88,168,273 100.00% 669,490 669,490 669,490 66,949,000 66,949,000 Ordinary Property Property 5. MAHISORN CO., LTD. LTD. CO., MAHISORN 5.

(1)

Fax 0-2544-1701 Fax

Tel: 0-2544-1702,1704,1707 Tel:

Jatujak, Jatujak, Bangkok 10900 Bangkok Jatujak, Jatujak,

SCB Head Office Bldg., 9 Rutchadaphisek Rd., Rd., Rutchadaphisek 9 Bldg., Office Head SCB

389,504,400 389,504,400 100.00% 5,490,000 5,490,000 5,490,000 5,490,000 549,000,000 549,000,000 Ordinary Training center Training 4. SCB TRAINING CENTRE CO., LTD. CO., CENTRE TRAINING SCB 4.

Fax: 0-2255-1565 Fax:

Tel: 0-2792-3800, 0-2792-3900 0-2792-3800, Tel:

Huai Khwang, Bangkok 10310 Bangkok Khwang, Huai

310

9 Rama 9 Rd., Huai Khwang, Khwang, Huai Rd., 9 Rama 9

Company G Tower Grand Rama 9, 12 9, Rama Grand Tower G Floor, Floor, 14 and

th th

1,000,000 1,000,000 100.00% 100,000 100,000 100,000 100,000 1,000,000 1,000,000 Ordinary Collection 3. SCB PLUS CO., LTD. CO., PLUS SCB 3.

Fax 0-2544-2165 Fax

Tel: 0-2544-2477 Tel:

Bangkok 10900 Bangkok

9 Rutchadaphisek Rd., Jatujak, Jatujak, Jatujak, Jatujak, Rd., Rutchadaphisek 9

Management CO., LTD. CO.,

25,000,000 25,000,000 100.00% 2,500,000 2,500,000 2,500,000 2,500,000 25,000,000 25,000,000 Ordinary Asset Asset 2. RUTCHAYOTHIN ASSETS MANAGEMENT MANAGEMENT ASSETS RUTCHAYOTHIN 2.

Fax: 001-855 (23) 426-116 (23) 001-855 Fax:

Tel: 001-855 (23) 426-145, 213-601-2 426-145, (23) 001-855 Tel:

Phnom Penh, Kingdom of Cambodia of Kingdom Penh, Phnom

Khan Daun Penh, Penh, Daun Khan

26 Monivong Rd., Sangkat Phsar Thmei 2, 2, Thmei Phsar Sangkat Rd., Monivong 26

2,687,888,635 2,687,888,635 100.00% 750,000 750,000 750,000 750,000 US$ 75,000,000 US$ Ordinary Banking 1.

CAMBODIAN COMMERCIAL BANK LTD. BANK COMMERCIAL CAMBODIAN

ownership* (Baht)

(Baht) of shares shares capital paid-up shares business Company name and address and name Company No.

Amount* Amount* Percentage of Number Paid-up and Issued of Type of Type

As of December 31, 2017 the Bank owned 10% or more of the issued shares of the following companies. companies. following the of shares issued the of more or 10% owned Bank the 2017 31, December of As

INVESTMENTS OF SIAM COMMERCIAL BANK PCL IN OTHER COMPANIES COMPANIES OTHER IN PCL BANK COMMERCIAL SIAM OF INVESTMENTS ANNUAL REPORT 2017 REPORT ANNUAL THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Type of Type of Issued and Paid-up Number of Percentage Amount* No. Company name and address business shares paid-up capital shares shares of (Baht) (Baht) ownership*

9. SCB ABACUS CO., LTD. Data Analytics Ordinary 10,000,000 1,000,000 999,997 100.00% 9,999,970 SCB Park Plaza Bldg., Tower 3 East, 22nd Floor, 19 Rutchadaphisek Rd., Jatujak, Jatujak, Bangkok 10900 Tel: 0-2544-6566

10. SCB PROTECT CO., LTD. Non-life Ordinary 2,000,000 200,000 199,997 100.00% 1,999,970 SC Tower, 23rd-25th Floor, 418 Phahon Yothin Rd. insurance Sam Sen Nai, Phaya Thai, Bangkok 10400 broker Tel: 0-2037-7899

11. SCB LIFE ASSURANCE PCL Life Ordinary 665,000,000 66,500,000 65,949,550 99.17% 12,540,163,475 Siam Commercial Bank PCL (Chidlom), insurance Bldg. 1, 4th-10th Floor, 1060 New Petchaburi Rd., Makkasan, Ratchathewi, Bangkok 10400 Tel: 0-2655-4000 Fax: 0-2256-1666 311 12. SIAM PHITIWAT CO., LTD. (3) Appraisal Ordinary 10,000,000 1,000,000 1,000,000 100.00% 10,000,000 SCB Park Plaza, Tower A Zone A West, service 18 Rutchadaphisek Rd., Jatujak, Jatujak, Bangkok 10900 Tel: 0-2795-1800

13. SOR.OR.KOR PCL (3) Commercial Ordinary - 597,423,062 595,883,972 99.74% 582,731,604 Siam Commercial Bank PCL, Head Office, Rutchayothin, 19th Floor, Zone C, 9 Rutchadapisek Rd., Jatujak, Jatujak, Bangkok 10900 Tel: 0-2544-2301-4 Fax 0-2544-3317

14. SIAM COMMERCIAL LEASING PCL (3) Collection Ordinary 5,677,975,020 567,797,502 564,336,277 99.39% 1,533,329,032 SCB Park Plaza Bldg., Tower 2 West, company 22nd Floor, 18 Rutchadaphisek Rd., Jatujak, Jatujak, Bangkok 10900 Tel: 0-2949-1800 Fax: 0-2949-1900

15. SIAM SAT NETWORK CO.,LTD. (2) (3) Satellite Ordinary 112,500,000 11,250,000 9,182,012 81.62% - SCB Park Plaza Bldg., Tower 2 West, service 21st Floor, 18 Rutchadaphisek Rd., Jatujak, Jatujak, Bangkok 10900

16. SIAM TECHNOLOGY SERVICE CO., LTD. (1) (3) Consultant Ordinary 30,000,000 3,000,000 2,249,993 75.00% 1 SCB Park Plaza Bldg., Tower 1 West, 18 Rutchadaphisek Rd., Jatujak, Jatujak, Bangkok 10900

305-352 NEW_M5.indd 311 12/3/61 16:37

305-352 NEW_M5.indd 312 NEW_M5.indd 305-352 13/3/61 17:12 13/3/61

Discontinued operations, or in process of dissolution or liquidation. or dissolution of process in or operations, Discontinued

(3)

Company held by a Bank affiliate in which the Bank holds more than 30% of shares. of 30% than more holds Bank the which in affiliate Bank a by held Company

(2)

Company held jointly by the Bank and a Bank affiliate in which the Bank holds more than 30% of shares. of 30% than more holds Bank the which in affiliate Bank a and Bank the by jointly held Company

(1)

. (under Section 258 of Securities and Exchange Act.) Exchange and Securities of 258 Section (under . affiliate its and bank the of value investment and

* * s affiliates, in which the bank hold more than 30% of theirs shares, the figures will depict the total percentage of shareholding shareholding of percentage total the depict will figures the shares, theirs of 30% than more hold bank the which in affiliates, s bank’ by investment indirect of case In

Remarks

Fax: 0-2201-3477 Fax:

Tel: 0-2201-3905-6 Tel:

Ratchathewi, Bangkok, 10400 Bangkok, Ratchathewi, Payathai,

17 17 Bldg. Pinyo Siri Rd., Ayudhaya Sri 475 Floor,

th th

TD. L CO., VENTURE SIRI 23. 10,000,000 10,000,000 100,000 100,000 10.00% Venture capital Venture

1,000,000 1,000,000 100,000,000 Ordinary

Fax 0-2252-5381 Fax

Tel: 0-2252-5200 Tel:

Bangkok 10330 Bangkok

athum Wan, Wan, athum P Lumpini, Rd. Ratchadamri

161 Soi Mahadlek Luang 3 3 Luang Mahadlek Soi 161

Nantawan Bldg., 11 Bldg., Nantawan Floor, Floor,

th th

., LTD. ., CORP OBAYASHI THAI 22. 61,753,160 61,753,160 2,000 2,000 10.00% Construction 20,000 20,000 10,000,000 Ordinary

Fax: (053) 767-077 (053) Fax:

Tel: (053) 767-015 (053) Tel:

Mae Fah Luang, Chiang Rai 57110 Rai Chiang Luang, Fah Mae

920/4 Moo7, Mae Fah Luang, Luang, Fah Mae Moo7, 920/4

TD. L CO., NAVUTI 21. 6,000,000 6,000,000 60,000 60,000 10.00% Agribusiness 600,000 600,000 60,000,000 Ordinary

Tel: (034) 490-082-7 (034) Tel:

Samutsakhon 74000 Samutsakhon

Muang, Muang, Banghrachao, Rd., II Rama 39/98

., LTD. LTD. ., CO LEATHER U.S. THAI 20. 19,375,000 19,375,000 2,500,000 2,500,000 10.00% Industry 25,000,000 25,000,000 193,750,000

Ordinary (3)

312

Fax: 0-2558-7566 Fax:

Tel: 0-3312-5114 Tel:

ok 10330 ok Bangk Pathumwan, Lumpini,

Sindhorn To Sindhorn wer 3 Bldg. 18 Bldg. 3 wer Floor, Wireless Rd. Rd. Wireless Floor,

th th

SUPERNAP (THAILAND) CO., LTD CO., (THAILAND) SUPERNAP 19. . 141,000,000 141,000,000 20,000,000 20,000,000 10.00% Data center Data 200,000,000 200,000,000 1,410,000,000 Ordinary

Fax: 0-2558-7566 Fax:

Tel: 0-2558-7555 Tel: provider

uri 11120 uri Nonthab Pakkret, Khlongkluea, service service

5/13 Moo 3, Chaengwattana Rd., Rd., Chaengwattana 3, Moo 5/13 system

NATIONAL ITMX CO., L CO., ITMX NATIONAL 18. TD. 13,529,863 13,529,863 97,238 97,238 19.45% yment yment Pa 500,000 500,000 50,000,000 Ordinary

Jatujak, Jatujak, Bangkok 10900 Bangkok Jatujak, Jatujak,

17 Floor, 18 Rutchadaphisek Rd., Rd., Rutchadaphisek 18 Floor, -22

nd nd th

Tower 2 West, West, 2 Tower Bldg., Plaza Park SCB

CO., LTD CO., . company

(3)

17. SIAM MEDIA AND COMMUNICATION COMMUNICATION AND MEDIA SIAM 2,333,800 2,333,800 1 1 33.34% 7,000,000 Holding 700,000,000 700,000,000 Ordinary

ownership* (Baht)

(Baht) of shares shares capital paid-up shares business Company name and address and name Company No.

Amount* Amount* Percentage of Number Paid-up and Issued of Type of Type ANNUAL REPORT 2017 REPORT ANNUAL THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

., Ltd. ., y Council, los P. Romulo Foundation Romulo los P. man, Operation Smile man, Green Globe man, national Advisor, Advisor, national of Thailand of Advisor, AIDS-Almost Zero AIDS-Almost Zero Advisor, , Eastern Star Real Estate PCL , CambridgeThai Position/Company Position/Company nors College, of Dulwich to the Board, Anti-Corruption Anti-Corruption Board, the to U.K. Trinity College Cambridge, U.K. Cambridge, College Trinity , U Thant Institute U , Dulwich College, London, U.K. London, College, Dulwich rman of International Advisory Advisory rmanInternational of echnology Experience in the past 5 years ject, Thai National AIDS Foundation AIDS National Thai ject, ansparency International ansparency Chai Advisor Honorary Fellow, Chairman Chairman, of Foundation under the Patronage Her Majesty the Queen UNICEF Ambassador in Thailand The Car Board, Honorary Inter the Gover Asia South Co Chevron Consultant, Organization Honorary Chair Foundation Advisor Chairman of the Vidyasirimedhi Institute of Science T and Pro Honorary Chair Institute Director, Siam Commercial Foundation Director, Green Globe Institute Chairman, London, AdvisoryMember of the Council of Tr Trustee Fellow,

------

rent Positions in Other Listed Companies Positions rent 17-Present Period 996-Present Current Positions in Non-Listed Companies Positions Current 1990-Present 1996-Present 1 1999-Present 2016-Present 2017-Present 2017-Present 20 2013-Present 2015-Present 2006-Present Past Positions 2008-2015 2009-2017 Cur 1989-Present 2000-Present 2003-Present 2003-Present None with director with director and management Family relationship relationship Family

313 % of 0.00% total shares w, Trinity Trinity w, ersity of program U.K. Education/Training Education/Training B.A. (Hons.) in La B.A. Univ College, Cambridge,

85 Age (yrs)

Name/Position Chairman of the Board (Independent Director)

Mr. Anand Panyarachun Anand Panyarachun Mr. -

1. 1. Information of the Directors and Executives of the Bank as 31 December 2017 Information of the Directors He does not hold any current position as chairman, or exective director, or authorized director, or authorized director, director, or exective currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 313 12/3/61 16:37 ANNUAL REPORT 2017 ., Ltd. ., ., Ltd. ., AG , The Tio Chew The , eiing School Board Track Track Position/Company Position/Company The Bureau of the Property nors, Amata Spring Country Club nors, Experience in the past 5 years Director, Siam Commercial Foundation Director, Advisor, Crown Kempinski Director, CPB Equity Co Director, Director Executive Thailand Association of P Vice Chairman, Honorary Member of the Board Gover X-Zell Biotech Co Chairman, Cycling Director, Limited Management Company

------

Period Current Positions in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2006-Present 1997-2017 2006-2017 2006-Present Past Positions 2008-2015 1999-2017 2007-Present 2015-Present 2009-Present None with director with director and management Family relationship relationship Family

314 - % of total shares

.S.A. .S.A.

ersity ing), University of ing), program Berkeley, U.S.A. Berkeley, aduate School of Education/Training Education/Training (Engineering), B.Sc. Chulalongkorn Univ (Engineer M.Sc. California, (Management), M.B.A. Graduate School of U UCLA, Management, Gr Ph.D., U UCLA, Management, Role of the Chairman Program, Thai Institute of Directors Association

- - - - - 72 Age (yrs) rent position as chairman, or exective director, or authorized director, or authorized director, director, or exective rent position as chairman, Name/Position Director Chairman of the Committee Executive

Dr. Vichit Suraphongchai Dr. - -

2. 2. He does not hold any cur He does not hold any or all of the aforementioned positions in other companies exceeding 3 business groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 314 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

yal yal

., Ltd. ., Vetchakij Co., Ltd. Co., Vetchakij Bureau of the Queen Sirikit Park al, Royal Project Foundation Project Royal al, es Insurance PCL Administration Council Administration angkun Foundation a Dabos Foundation vuti Co., Ltd. vuti Co., iraj Foundation

Position/Company Position/Company The Crown PropertyThe Crown Bereau The National Institute of The Siam Cement PCL ikit Foundation for Promotion Promotion Foundation for y General, Sai Jai Thai Foundation Thai Jai Sai General, y Experience in the past 5 years al Household al Secretar Chaipattana Foundation Director, Baanboung Chairman, Sir Director, Isar Chairman, CPB Equity Co Chairman, Chairman, Foundation Na Director, Chairman, Grand Chamberlain, Roy Siam Commercial Foundation Director, Chairman, Director and Director-General, PropertyThe Crown Bureau Dev Chairman, Treasurer, SecretaryGener Development (NIDA) Bureau of the Ro Lord Chamberlain, Household of Supplementary Occupation and of Her Majesty Techniques Related Sir Queen Phr Director, Secretary General, Foundation

------

rent Positions in Other Listed Companies Positions rent Period 2006-Present 1999-Present 2007-Present 1998-Present 2001-Present 2002-Present 2006-Present 2012-Present Cur 1987-Present 2016-Present Past Positions 1987-2016 2008-2016 2007-Present in Non-Listed Companies Positions Current 1987-Present 1988-Present 1992-Present 1990-Present 1991-Present 1992-Present None with director with director and management Family relationship relationship Family

315 - % of total shares U.K. sity, Australia sity, program Education/Training Education/Training (Economics), Australian (Economics), . (Hons.) in Economics, . B. Sc B. London School of Economics, University of London, D. Ph. National Univer Role of the Chairman Program, Thai Institute of Directors Association

- - - 75 Age (yrs) vernance rent position as chairman, or exective director, or authorized director, or authorized director, director, or exective rent position as chairman, ya Name/Position Director Chairman of the Compensation, Nomination, and Corporate Go Committee

Dr. Chirayu Isarangkun Dr. Na Ayutha

3. 3. - - He does not hold any cur He does not hold any or all of the aforementioned positions in other companies exceeding 3 business groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 315 12/3/61 16:37 ANNUAL REPORT 2017

., Ltd. ., e Assurance PCL e idge Thai Foundation under idge b Samaggi Insurance PCL Prince Mahidol Foundation Administration Council (NIDA) vernment Pension Fund vernment Pension reasurer, Thai Red Cross Society Cross Red Thai reasurer, yal Paragon Enterprise Co., Ltd. Paragon Enterpriseyal Co., t Director, Minor InternationalMinor PCL Director, t inakharinwirot University Council Position/Company Position/Company The Kenan Institute Asia The Kenan Institute Thai Institute of Directors The National Institute of Anti-Corruption Organization of The Kenan Institute Asia The Kenan Institute , Cheevamitr Social Enterprise Co., Ltd Enterprise Social Cheevamitr Co., , man, Siam Paragon Development Co., Ltd. Co., Paragon Siam Development man, Experience in the past 5 years Director Advisior to Civil Sanction Committee, The Securities and Exchange Commission Director and T and Director Bliss Foundation Chairman, Director, Thailand Chairman, Siam Commercial Foundation Chairman, Chair Ro Director, Member, Development Cambr Director, of Her Majesty th Queen the Patronage Vice Chairman, Independen Siam Piwat Co Director, Ramathibodi Foundation Vice Chairman, Sr Member, SCB Lif Chairman, Chub Chairman, Chairman, Chairman, Association Expert Member of the Board Go Directors, Director, Director of the Corporate Social Responsibility Institute (CSRI), Thailand Stock Exchange of Siam Commercial Foundation Director,

------

rent Positions in Other Listed Companies Positions rent 13-Present Period 017-Present

2017-Present 2014-Present 2014-Present 2014-Present 2016-Present 2 2011-Present 2012-Present 2013-Present 20 2006-Present 2011-Present 2006-Present Current Positions in Non-Listed Companies Positions Current 1992-Present 2007-Present 2009-Present 2009-Present 2011-2013 2003-2014 2008-2016 Cur Past Positions 2011-2013 2013-2014 2008-Present None with director with director and management Family relationship relationship Family

316 - % of total shares

Audit , Thai Institute Thai Institute .S.A. sity of sity of program U.K. U.K. al Sciences and al Sciences and Education/Training Education/Training B.A. (Natur B.A. Univer Economics), Cambridge, (Natural Sciences and M.A. Univer Economics), Cambridge, (Economic Development), M.A. U Williams College, Director Certification Program, Thai Institute of Directors Association Monitoring the Internal Thai Institute of Function, Directors Association Monitoring the Quality of Financial Reporting, of Directors Association Successful Formulation and of StrategyExecution Thai Institute of Directors Association

------72 Age (yrs)

ate ate rent position as chairman, or exective director, or authorized director, or authorized director, director, or exective rent position as chairman, sibility Committee nance Committee Name/Position Independent Director Chairman of the Corpor Social Respon Member of the Nomination, Compensation and Corporate Gover

Khunying Jada Wattanasiritham Jada Khunying - -

4. 4. - or all of the aforementioned positions in other companies exceeding 3 business groups. positions in other companies exceeding 3 business or all of the aforementioned She does not hold any cur She does not hold any

305-352 NEW_M5.indd 316 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

, ,

nal

orm , ASEAN ,

ersity Council orm Council Public Sector Public Accounting al Patronage of of al Patronage al Patronage of al Patronage ivate Sector Collective ivate Sector Collective orn University Accounting Advanced Info ServiceAdvanced Info PCL Thai Solar Energy PCL sity of Technology Thonburi Technology sity of ruption Certification Committee ation of Accounting ation of Chulalongkorn University on Accounting, Insurance Commission Accounting, on Faculty of Commerce Faculty of Commerce General Insurance Fund, vernance and Policy, vernance and Policy, Advanced Insurance Institute Position/Company Position/Company Thai Institute of Directors Association Thai Institute of Directors Association Anti-dumping and Subsidies Anti-dumping and Subsidies Experience in the past 5 years Vice President, Federation of Vice President, under the Roy Professions His Majesty the King Auditing Standards Chairman of Feder Committee, under the Roy Professions of His Majesty the King AdvisoryMember of Committee Thai Institute of CG Scorecard Project, Directors Nam Heng Independent Director, , Concrete (1992) Co.,Ltd. Sub-committee on the Ref Member, of International and other Economy National Ref Economic Matters, Faculty of Commerce and President, Chulalongk Accountancy, Association Alumni Board, Executive Accountancy, and Federation of President, under the Roy Professions His Majesty the King AdvisoryMember of Committee on Corporate Go Association Thai Institute of Directors Audit Committee Director and Chairman of the Association Thai Institute of Directors Independent Director, Independent Director and Member of the PTT Global Chemical PCL Audit Committee, Independent Director, Expert Member, Ministry of Finance Audit Committee, Member of the Office of Insurance Commission Expert Member Member, Committee under the Ministry of Commerce Pr Thailand’s Member of Action against Cor Member of the Finance and Property Committee, Univer King Mongkut’s OIC Director, Member of the Mahidol University Inter Mahidol Univ Audit Committee, Chairman, ExpertAccounting, Member on Audit and Evaluation Committee

------

rent Positions in Other Listed Companies Positions rent Period

2014-2017 2013-Present in Non-Listed Companies Positions Current 2012-Present 2015-Present 2016-Present Past Positions 2011-2014 2011-2014 2013-2014 2013-2015 2014-2015 2012-2016 2013-2016 2014-2017 2015-2017 Cur 2016-Present 2017-Present 2014-Present 2014-Present 2014-Present 2015-Present 2016-Present 2017-Present 2017-Present None with director with director and management Family relationship relationship Family

317 - % of total shares

am,

nance orn rends, ersity program Western Ontario, Ontario, Western Class Hons.) vard Business School, vard Business School, Thai Institute of Directors nd Education/Training Education/Training sity B.Acc. (2 B.Acc. in Accounting, Chulalongk in Accounting, Univer Auditing, Diploma in Chulalongkorn Univ Management Progr Executive School of Business, Ivey University of Canada ServicesLeading Professional Har Firms, U.S.A. Director Certification Program, Thai Institute of Directors Association Finance Institutions Gover Program, Association Ethical Leadership Program, Thai Institute of Directors Association Strategy Board Master Class, Thai Institute of Directors Association T Board Matters and Thai Institute of Directors Association

------

- man, or exective director, or authorized director, or authorized director, director, or exective man, Age (yrs) 65 Name/Position Independent Director Audit Chairman of the Committee

Mr. Prasan Chuaphanich Mr. - -

5. 5. or all of the aforementioned positions in other companies exceeding 3 business groups. positions in other companies exceeding 3 business or all of the aforementioned He does not hold any currentHe does not hold any position as chair She does not hold any current position as chairman, or exective director, or authorized director, or authorized director, director, or exective currentShe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 317 12/3/61 16:37 ANNUAL REPORT 2017 yal yal atronage The Mae Fah The Mae Fah .S.A.) incess Mother incess Mother incess Mother al Highness the ica Institute of elopment Foundation Water Board Water atronage yal Initiative Discovery Initiative yal Institute e Discovery Foundation ince Damrong Rajanupab and and ince Damrong Rajanupab vuti Co., Ltd. vuti Co., Ltd. Co., vutayayu Position/Company Position/Company East Asia Development Foundation Development Asia East The Mae Fah Luang Foundation The Mae Fah Luang Foundation Volunteer Doctors Foundation of Volunteer Mother The Crown PropertyThe Crown Bureau Volunteer Doctors Foundation of Volunteer Experience in the past 5 years Director, Japan-Amer Director, U Management Science (Hawaii, Director and Secretary-General, Luang Foundation under Royal P Luang Foundation under Royal Prostheses Foundation of Her Ro Director, Highness the Princess Mother Pr Chairman, Momjao Jongjitthanom Disakul Foundation Siam Commercial Foundation Director, Director, Highness the Pr Her Royal Elephant Reintroduction Foundation Director, Na Director, Breast Foundation under the Director, of Her Roy Patronage Princess Chairman, Na Director, Ro Chairman, Director and Secretary-General, Initiativ Royal Rakkaew Foundation Chairman, Advisor, King RamaIV Foundation Director, Dev Vice Chairman, Prostheses Foundation of Vice Chairman, Highness the Pr Her Royal Chairman, under Royal P under Royal National Member, Advisor, Highness the Pr Her Royal

------

rent Positions in Other Listed Companies Positions rent Period 1972-2015 Past Positions 2009-2013 1992-2015 2001-2015 2007-2015 1985-2016 2002-2016 Cur 2011-Present 2014-Present 2015-Present - None in Non-Listed Companies Positions Current 1989-Present 1995-Present 1999-Present 2003-Present 2010-Present 2010-Present 2011-Present 2012-Present 2015-Present 2016-Present 2015-Present None with director with director and management Family relationship relationship Family

318 - % of total shares

program Education/Training Education/Training . (Business Administration), (Business . B. Sc B. Indiana University Bloomington, U.S.A. Role of the Chairman Program, Thai Institute of Directors Association

- - 78 Age (yrs) Name/Position Director

M.R. Disnadda Diskul * M.R. -

6. 6.

He does not hold any current position as chairman, or exective director, or authorized director, or authorized director, director, or exective currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned on 31 January effective 2018. Disnadda Diskul resigned as a director of the Bank, * M.R. Remark:

305-352 NEW_M5.indd 318 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

, ,

Accountancy, Accountancy, , vijaya Foundation vijaya ery PCL , Ltd. or Management or Management Public Sector Audit Sector Public mance Agreement mance ok College Council ate Governance ate Governance Total Industrial Services Total PCL Wacoal Thai Thailand Securities vernment Pension Fund vernment Pension Thai President Food PCL The Erawan Group PCL , Sri University Pathum Council , ersity ersity Investment Risk Investment in State Private Investments Ltd. Prince Pijitjirapa Tevakul Tevakul Prince Pijitjirapa The Comptroller General’s The Comptroller General’s Position/Company Position/Company Thai Wacoal PCL Wacoal Thai Office of the Securities and Thai Listed Companies Association Thai Listed Companies The Federation of Accounting The Federation of acoal PCL acoal Experience in the past 5 years Ltd. Dean, Faculty of Commerce and Accountancy Faculty of Commerce and Dean, Univ Thammasat Global Foundation f Director, Education Full-Time Member of the Department of Faculty of Commerce and Finance, Univ Thammasat H.R.H. Director, Foundation Member of the Risk Management Go Sub-Committee, Member of the Sub-Perfor Committee, Department Advisor, Professions Expert Member, Sub-Committee Management Social Security Fund Independent Director, Co., Independent Director and Chairman of the Audit Committee, Independent Director and Member of the President Bak Audit Committee, Independent Director, Audit Committee Chairman of the W Thai Chairman of the Corpor Committee, Independent Director and Member of the Audit Committee, Member of Operation Committee, Sangvian IndaraThe Professor Expert Member Southeast Bangk Member, Expert Member, Undertakings Committee Policy Arbitrator, Commission Exchange Independent Director, Depository Co., Independent Director, Thailand Clearing House Co., Siam Commercial Foundation Director, Director, Expert Member on Finance, and Evaluation Committee

------

Period 13-2015 010-2013 2016-Present 2010-Present 2012-2013 20 2006-2016 2010-2016 2013-2016 2011-2017 2013-2017 2014-2017 in Other Listed Companies Positions Current 1994-Present 2013-Present 2017-Present 2013-Present 2013-Present 2013-Present 2013-Present 2016-Present 2016-Present 2017-Present 2017-Present Past Positions 2 2002-Present 2012-Present in Non-Listed Companies Positions Current 2006-Present None with director with director and management Family relationship relationship Family

319 - % of total shares

University West Virginia West University of program U.S.A. , U.S.A. , Class Hons.) in Class Hons.) in st Education/Training Education/Training (1 Finance, Thammasat Finance, (Finance), M.B.A. University (Finance), Ph.D. Pittsburgh, Director Certification Program, Thai Institute of Directors Association Audit Committee Program, Thai Institute of Directors Association B.B.A.

- - - - - man, or exective director, or authorized director, or authorized director, director, or exective man, Age (yrs) 61

Name/Position Independent Director Audit Member of the Committee Member of the Corporate Social Responsibility Committee

Dr. Kulpatra Sirodom Dr. - - -

7. 7. She does not hold any currentShe does not hold any position as chair or all of the aforementioned positions in other companies exceeding 3 business groups. positions in other companies exceeding 3 business or all of the aforementioned He does not hold any current position as chairman, or exective director, or authorized director, or authorized director, director, or exective currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned on 31 January effective 2018. Disnadda Diskul resigned as a director of the Bank, * M.R. Remark:

305-352 NEW_M5.indd 319 12/3/61 16:37 ANNUAL REPORT 2017

, Thai Red Thai Red , ty Perfect PCL ty Perfect ., Ltd. ., y Blood Donors , Osotspa Co., Ltd. Osotspa Co., , . Property PCL . igadayavan Palace Foundation Palace igadayavan y Blood Donors Committee, Position/Company Position/Company Experience in the past 5 years Chairman, K.C Chairman, Proper Independent Director, Voluntar Advisor to the National Blood Center Committee, Cross Society Cross Member of the Recruitment and Promotion of Voluntar of Thai Red Cross Society Siam Commercial Bank PCL President, Mr Director, Advisor to the Fund Raising Sub-Committee, Thailand The Kidney Foundation of Index Living Mall Co Advisor, Advisor to the Vice Chairman and Chief Committee Executive Siam Commercial Foundation Director,

------

ent Positions in Other Listed Companies ent Positions Period

Past Positions 2004-2015 in Other Listed Companies Positions Current 2015-Present in Non-Listed Companies Positions Current - None Past Positions 2007-2015 2007-2015 2016-Present 2007-2015 2009-2015 Curr 2008-Present - None in Non-Listed Companies Positions Current 2015-Present 2012-2016 None with director with director and management Family relationship relationship Family

320 - 0.00% None % of total shares

, , am

.S.A. Harvard University, U.S.A. University, program U.S.A. Education/Training Education/Training (Business), University of (Business), A.B. (Magna Cum Laude) in A.B. Dartmouth Economics, College U.S.A. (Finance), M.B.A. Graduate School of Business U Administration, Director Certification Program, Thai Institute of Directors Association B.B.A. Colorado, Progr Management Advanced Harvard (AMP), Role of the Chairman Program, Thai Institute of Directors Association

------72 70 Age (yrs)

n y current position as chairman, or exective director, or authorized director, or authorized director, director, or exective y current position as chairman, Name/Position Independent Director Audit Member of the Committee Director Member of the Executive Committee Member of the Corporate Social Responsibility Committee

Mr. Ekamol Kiriwat Mr. - - Kannikar Chalitapor Mrs. - - -

8. 8.

9. 9. He does not hold any current position as chairman, or exective director, or authorized director, or authorized director, director, or exective currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned or all of the aforementioned positions in other companies exceeding 3 business groups. positions in other companies exceeding 3 business or all of the aforementioned She does not hold an

305-352 NEW_M5.indd 320 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED ., Ltd. ., ormation Center Thailand Office of Knowledge Office of Knowledge nor, Financial Institutions Financial Institutions nor, PCL vernment Housing Bank Agro Enterprise Co., Ltd. Agro Enterprise Co., Position/Company Position/Company Organization) Experience in the past 5 years Deputy Gover Bank of Stability, Real Estate Inf Chairman, Go Chairman, Member of the Council State, Office of the Council State Audit Director and Chairman of the Committee, Italian-Thai Independent Director, Development Expert Director, Management and Development (Public Osotspa Co Independent Director,

------

Period 2014-2015 2016-Present Past Positions 2009-2014 2012-2015 2014-2015 2015-2016 2015-2017 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2015-Present None with director with director and management Family relationship relationship Family

321 0.00% % of total shares

, am, ersity, U.S.A. ersity, ersity sity, U.K. U.K. sity, et Academy et program Thai Institute of Directors isprudence (Hons. Oxon), Oxon), isprudence (Hons. OIC Advanced Class Hons.), Class -at-Law, -at-Law, U.K. Temple, Middle -at-Law, nd Education/Training Education/Training Chulalongkorn Univ Barrister Thai Association Bar in Jur B.A. Univer Oxford Barrister Advanced Management Program Harvard Univ (AMP), Director Certification Program, Thai Institute of Directors Association Chartered Director Course Association Thai Institute of Directors the Quality of Financial Improving Reporting, Association Progr Advanced Executive Capital Mark Thailand Insurance Leadership Program, Insurance Institute LL.B., (2 LL.B.,

------63 Age (yrs) Independent Director Member of the Committee Executive

Name/Position Mr. Krirk Vanikkul Krirk Mr. - -

10. 10.

305-352 NEW_M5.indd 321 12/3/61 16:37 ANNUAL REPORT 2017

ecutive ecutive echnology orm Committee net Thailand PCL net ersity Council mation Technology, Technology, mation vernment Agency vernment ., Ltd. ., or Research in orm Steering Assembly orm Steering n Foundation The National Economic and The National Economic and nal Audit Committee, nal of Thailand of Agency net Foundation for the net Foundation for Tradesiam Co., Ltd. Co., Tradesiam ormation Technology Projects Projects Technology ormation T-Net Co., Ltd. Co., T-Net Position/Company Position/Company Organization) mation Technology mation Experience in the past 5 years President, National Science and T National Science and President, Development Member of the Ex Vice Chairman, and Member of the Risk Committee, Management Committee, Inter Management Committee, Chairman, National Ref Member, Inter Director, Development Director and Chairman of the Executiv Committee, Inf Director, Under the Initiative of H.R.H.PrincessUnder the Initiative Maha Chakri Sirindhor Expert Member and of the Mahidol University Inter Mahidol University Council Khon Kaen Univ Member, Phoenixict Co Director, Expert Member on Infor National Economic Ref Member, Board Member, Public Sector Audit and Evaluation Committee Sector Public Board Social Development Electronic Go Chairman, (Public Foundation f Director, Infor

------

Period 017-Present Past Positions 2010-2016 2002-2017 2008-2017 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2003-Present 2015-2017 2016-Present 2005-Present 2016-Present

2016-Present 2017-Present 2017-Present

2017-Present 2 2017-Present 2017-Present

None with director with director and management Family relationship relationship Family

322 - % of total shares

rends, University University of ical Engineering), ical Engineering), program Education/Training Education/Training (Electrical Engineering), B.Sc. Imperial College, U.K. of London, (Electr Ph.D. Imperial College, U.K. London, Role of the Chairman Program, Thai Institute of Directors Association Director Certification Program, Thai Institute of Directors Association T Board Matters and Thai Institute of Directors Association

- - - - - 64 Age (yrs) Independent Director Member of the Committee Executive

Name/Position Dr. Taweesak Koanantakool Taweesak Dr. - -

11. 11. He does not hold any current position as chairman, or exective director, or authorized director, or authorized director, director, or exective currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 322 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

ate ate national PCL ty Development ty Development ly White & Case White & Case ly Airlines PCL li Jucker PCL li Jucker asers and Neave asers and Neave ., Ltd. ., ammy PCL ammy ower Supply PCL Supply ower ok Dusit Medical Services PCL yarat Co., Ltd. yarat Co., ance PCL asinee Co., Ltd. asinee Co., Thai Airways InternationalAirways PCL Thai InternationalAirways PCL Thai Position/Company Position/Company asers Centrepoint Limited, Singapore asers Centrepoint Limited, Weerawong, Chinnavat and Chinnavat Weerawong, WC&P Holding Co., Ltd. WC&P Holding Co., Thai Listed Companies Association Thai Listed Companies Yaksa Co., Ltd. Co., Yaksa Singapore Experience in the past 5 years ernance Committee, ernance Independent Director, Nok Independent Director, Minor Inter Independent Director, Director, Chairman, Limited (Former Peangpanor Limited) (Thailand) Audit Independent Director and Member of the GMM Gr Committee, Audit Independent Director and Member of the Committee, Audit Independent Director and Member of the Golden Land Proper Committee, PCL Fr Independent Director, Limited, National P Director, Audit Independent Director and Chairman of the Committee, Director, Ber Independent Director, Audit Independent Director and Member of the Bangk Committee, Sar Director, Punnakhate Co Director, Pitcha Director, Director, Independent Director and Chairman of the Compensation and Corpor Nomination, Gov Assur SCB Life Fr Director, Big C Supercenter PCL Director,

------

Period Past Positions 2009-2013 2011-2013 1996-2014 1996-2014 2006-2014 2009-2014 2009-2014 2013-2014 2008-2017 2014-2017 2015-2017 in Other Listed Companies Positions Current 2001-Present 2015-Present in Non-Listed Companies Positions Current 2004-Present 2005-Present 2006-Present 2010-Present 2011-Present 2013-Present 2016-Present None with director with director and management Family relationship relationship Family

323 - % of total shares

se am, orn University program sity of Pennsylvania Law Law sity of Pennsylvania et Academy et -at-Law, Thai Bar Association Thai Bar -at-Law, Education/Training Education/Training LL.B., Chulalongk LL.B., Univer LL.M., U.S.A. School, Barrister Director Certification Program, Association Thai Institute of Directors Director Cour The Executive Association Thai Institute of Directors Progr Advanced Executive Capital Mark

------59 Age (yrs) vernance

y current position as chairman, or exective director, or authorized director, or authorized director, director, or exective y current position as chairman, Independent Director Member of the Nomination, Compensation and Corporate Go Committee

Name/Position

Mr. Weerawong Weerawong Mr. Chittmittrapap - -

12. 12.

He does not hold an or all of the aforementioned positions in other companies exceeding 3 business groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 323 12/3/61 16:37 ANNUAL REPORT 2017 ., Ltd. ., prise

, Position/Company Position/Company Experience in the past 5 years Deputy Director-General, Deputy Director-General, The Fiscal Policy Office The Fiscal Policy Advisor Financial Policy Office The Fiscal Policy IRPC PCL Director, Member of Risk Management Committee, PCL IRPC State Enter Director General, Office Policy National Credit Bureau Co Chairman,

------

ositions ent Positions in Other Listed Companies ent Positions rent Positions in Non-Listed Companies Positions rent Period Past P 2012-2014 2014-2015 Curr 2016-Present Cur 2015-Present 2015-Present 2015-Present None with director with director and management Family relationship relationship Family

324 - % of total shares

nance nance

sity, U.S.A. sity, Thai Institute of rends, Thai Institute Thai Institute rends, program Education/Training Education/Training B..A. (Economics) (Hons.), B..A. Thammasat University Economics), (Economics / Policy M..A. University of Illinois at U.S.A. Urbana-Champaign, (Economics / Macroeconomics Ph.D. and International Finance), Claremont Graduate Univer Director Certification Program, Association Thai Institute of Directors Directors,Financial Statements for Association Thai Institute of Directors Role of the Nomination & Gover Committee Program, Association Directors T Board Matters and of Directors Association

------

46 Age (yrs) vernance

Director Member of the Nomination, Compensation and Corporate Go Committee

Name/Position Dr. Ekniti Nitithanprapas Dr. - -

13. 13.

305-352 NEW_M5.indd 324 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

ship ship

nance nance Advanced elopment, elopment, ategic & ategic & ok Dusit man of the Review Position/Company Position/Company Advanced Info ServicesAdvanced Info PCL Experience in the past 5 years President, Siam Cement PCL President, SCG Legal Counsel Limited Chairman, Director, Siam Cement PCL Director, Chairman and Chairman of the Leader and Compensation Committee, ServicesInfo PCL Chair Independent Director, Leadership & Compensation Development Committee, Member of the Nomination & Gover Committee, Member of the Str Committee, Organizational and Member of the CSR Committee, Committee for Sustainable Dev Sustainable Committee for Intouch Holding PCL Bangk Independent Director, Medical Services PCL

------

ositions ent Positions in Non-Listed Companies ent Positions Period Past P 2004-2016 2015-2016 in Other Listed Companies Positions Current 2006-Present 2016-Present 2017-Present 2006-2015

2017-Present Curr - None None with director with director and management Family relationship relationship Family

325 - % of total shares

gia Institute ersity, U.S.A. ersity, Georgia Institute , U.S.A. , U.S.A. , program sity Education/Training Education/Training (Electrical Engineering) Class Hons.), Chulalongkorn Class Hons.), st B.Sc. (1 Univer (Engineering), M.S. Technology of Geor (Management), M.S. Technology of Advanced Management Program Harvard Univ (AMP), Director Certification Program, Association Thai Institute of Directors

- - - - 62 Age (yrs) vernance Independent Director Member of the Nomination, Compensation and Corporate Go Committee

Name/Position Mr. Kan Trakulhoon Kan Mr. - -

14. 14.

305-352 NEW_M5.indd 325 12/3/61 16:37 ANNUAL REPORT 2017 poration PCL y, y, y, Ministry of Finance y, al Patronage of of al Patronage ial Park Co., Ltd. ial Park Co., Accounting ormation Center Vichitbhan Palmoil PCL Vichitbhan Palmoil ak Asset Development Asset Development ak The Treasury DepartmentTreasury The Position/Company Position/Company ASEAN Potash Mining PCL ASEAN Potash PTT ExplorationPCL Production and Tris Corporation Co., Ltd. Corporation Co., Tris Experience in the past 5 years Ltd. Deputy Permanent Secretar Deputy Permanent Chairman, Independent Director and Member of the Audit Committee, Audit Committee, Director, Director General, Dhanar Chairman, Co., Real Estate Inf Director, Independent Director and Chairman of the MPG Cor Audit Committee, Esso (Thailand) PCL Independent Director, Pinthong Industr Director, Siam Commercial Foundation Director, Secretar Deputy Permanent Ministry of Finance Federation of President, under the Roy Professions His Majesty the King Diector,

------

ositions rent Positions in Non-Listed Companies Positions rent Period Past P 2012-2014 2012-2015 2013-2016 2015-2016 2015-2017 in Other Listed Companies Positions Current 2013-Present 2017-Present Cur 2014-Present 2017-Present 2017-Present 2017-Present 2015-2017 2015-2017 2016-Present None with director with director and management Family relationship relationship Family

326 - % of total shares Training Training am, rends, et Academy et program Angelo State University, Texas, Texas, Angelo State University, Education/Training Education/Training Thammasat University B.B.A., M.B.A., U.S.A Accreditation Program, Director Association Thai Institute of Directors Audit Committee Program, Thai Institute of Directors Association Thai Institute of Directors Progr Advanced Executive Capital Mark on Process of Senior Executives Judicial Judgment Program, Institute Ethical Leadership Program, Association Thai Institute of Directors T Board Matters and Association Thai Institute of Directors

------58 Age (yrs)

Director Member of the Corporate Social Responsibility Committee Name/Position

Mr. Chakkrit Parapuntakul Mr. - -

15. 15. He does not hold any current position as chairman, or exective director, or authorized director, or authorized director, director, or exective currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 326 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED estment ities Co., Ltd. ities Co., e Assurance PCL e Ventures Co., Ltd. Co., Ventures Vinasiam Bank incess Pa Foundation incess Pa AT Telecom PCL Telecom AT Position/Company Position/Company Experience in the past 5 years Chairman, SCB Secur Chairman, Director and Chairman of the Inv SCB Lif Committee, Vice Chairman, C Director, Siam Commercial Foundation Director, Pr Director, Digital Chairman,

------

Period 2009-2015 2017-Present 2017-Present Past Positions 2009-2015 2009-2015 2014-2015 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2015-Present None with director with director and management Family relationship relationship Family

327 - % of total shares am, , Office of the Urban Green Chulalongkorn Academy Sasin Graduate et Academy et program sity Education/Training Education/Training B.A. (Economics), B.A. Univer (Finance), M.B.A. Institute of Business Administration Institute of Business Accreditation Program, Director Association Thai Institute of Directors Progr Advanced Executive Capital Mark Leadership Program, Attorney General Leadership Program, Institute Development CourseNational Defense Thailand Energy

- -

- - - -

- 50 Age (yrs)

President and Chief President and Chief Officer Executive Member of the Committee Executive Member of the Corporate Social Responsibility Committee

Name/Position Mr. Arthid Nanthawittaya Mr. - - -

16. 16.

305-352 NEW_M5.indd 327 12/3/61 16:37 ANNUAL REPORT 2017 e Vice President- e e Assurance PCL e Abacus Co., Ltd. Abacus Co., Position/Company Position/Company ungthai Bank PCL The Office of SMEs Promotion Experience in the past 5 years First Senior Executiv Financial Management Managing Director, Kr Group, Director, (OSMEP) SCB Chairman, SCB Lif Director,

- - - -

Period Past positions 1997-2016 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2016-Present 2017-Present 2017-Present None with director with director and management Family relationship relationship Family

328 - % of total shares

.S. National National Thammasat or Joint State-Private or Joint State-Private am 13, Capital Market am 13, e Program in Commerce Thai Institute of Directors program Accounting, University of Accounting, nance Committee (RNG), Thai nance Committee (RNG), ade (TEPCoT 6), Commerce Commerce ade (TEPCoT 6), Education/Training Education/Training Bachelor of Business Administration in Bachelor of Business Accounting (Honors), University in M.B.A. U Urbana-Champaign, Illinois, Accreditation Program Director 45), (DAP (IOD) Director Certification Program Thai Institute of (DCP 76/2006), Directors (IOD) College,National Defence CourseDefence f Sectors (NCD 21) Progr Executive Academy Executiv Top Tr and Academy Role of the Nomination and Gover Institute of Directors (IOD) Role of Chairman Program (RCP), Thai Institute of Directors (IOD)

------

- - 59 Age (yrs) Vice Senior Executive Senior Executive Chief Financial President, Officer

Name/Position Mrs. Kittiya Todhanakasem Todhanakasem Kittiya Mrs. -

17. 17.

305-352 NEW_M5.indd 328 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED estment ungthai Bank PCL Vice President, e Assurance PCL e Ventures Co., Ltd. Co., Ventures Asset Managament Co., Ltd. Asset Managament Co., Position/Company Position/Company AIA Experience in the past 5 years Senior Executive Senior Executive Compliance & Managing Director, Kr Legal Management Goup, General Manager & Chief Inv Officer, SCB Lif Director, SCB Chairman, Digital Director,

- - - - -

Period

Past positions 2005-2014 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current - None Past positions 1999-2015 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2015-Present 2015-Present 2017-Present None None with director with director and management Family relationship relationship Family

329 - - % of

total shares

porate porate w, w,

ernance national national ecutives on ecutives e Court, ancisco National National prises and Public prises and Public or Executives or Executives , ersity Exchange Commission, Exchange or Joint State-Private , U.S. (Scholarship) U.S. , orn University sity of Chicago, U.S. sity of Chicago, , U.S. , program -at-Law, Institute of Legal Institute of Legal -at-Law, sted Companies Association, Association, Companies sted nance for Directorsnance for and Senior Education/Training Education/Training CFA Institute CFA orateSecretary Program Development LL.B., Chulalongk LL.B., Barrister Association Thai Bar Education of in Business Law LL.M. Chulalongkorn Univ in International Banking La LL.M. Boston University Li Thai Corp Cor Director Institute (PDI), Public Gover of State Enter Executives Organizations Association Thai Institute of Directors Financial Institution Gov (IOD), Program (FGP) The Securitiesand Compliance Knowledge for Head of for Compliance Knowledge Compliance College,National Defense CourseDefense f Sectors (NCD) Administrativ Office of the Administrative Justice f Course (AJE) The Program Senior Ex for Justice Administration (BYS) Bachelor of Finance, San Fr Bachelor of Finance, State University in Financial and Inter M.B.A. Univer Business, Director Certification Program, Thai Institute of Directors C.F.A.,

------

- -

------55 56 Age (yrs) Vice Vice Senior Executive Senior Executive Chief Legal President, and Control Officer Senior Executive Senior Executive Chief Risk President, Officer

Name/Position

Mrs. Wallaya Wallaya Mrs. Kaewrungruang - Mr. Anucha Laokwansatit Anucha Mr. -

19. 19.

18. 18. She does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentShe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned He does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 329 12/3/61 16:37 ANNUAL REPORT 2017 , McKinsey & y, ANZ Bank y, Ventures Co., Ltd. Co., Ventures Abacus Co.,Ltd. Position/Company Position/Company Vice President, Operations and Vice President, Experience in the past 5 years Executive Executive Program Deliver Digital Director, SCB Director, Director (Senior Partner), Financial Services Sector, Company Senior Partner and Managing Director The Boston Consulting Group

- - - - -

ositions in Other Listed Companies

Period Past positions 2010-2016 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2017-Present 2017-Present Past positions 2008-2012 2012-2015 P Current - None in Non-Listed Companies Positions Current - None None None with director with director and management Family relationship relationship Family

330 - - % of total shares

echnische echnical echnische Technische Technische ich Wilhelms ering internal and aining Program – Bonn, Germany Bonn, Germany Dresden, Germany Dresden, Germany Dresden, program Education/Training Education/Training Diploma in Organic and Inorganic T Chemistry – Old Swan College Tr Management cov Midland Bank, external residential courses Diploma of Econmics, Rheinische Frieder Universitaet, T Bachelor of Economics, Universitaet, T Master of Economics, Universitaet, in Economics, Ph.D. Universitaet,

------65 52 Age (yrs) Vice Vice

ormation Officer Jens Lottner Senior Executive Senior Executive President, Officer Technology Chief Senior Executive Senior Executive Chief President, Transf

Name/Position Mr. Colin Dinn Mr. - Dr. Dr. -

20. 20.

21. 21. He does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned He does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 330 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED , ammy PCL ammy lic y Limited , P.K Garment P.K , t Co., Ltd. t Co., attana Co., Ltd. attana Co., w Business Co.,Ltd. uang International Airportuang International wan Management Co., Ltd. wan Management Co., Digital Ventures, Ventures, Digital wan Co., Ltd. wan Co., Assets Management Co., Ltd. Assets Management Co., apee Gasikam Co., Ltd. apee Gasikam Co., Position/Company Position/Company Limited Aksorn Education PLC Experience in the past 5 years Chief Executive Officer Chief Executive (Import - Export) Compan Officer Chief Executive GMM Gr Business), (Broadcasting Officer Director and Chief Executive Limited Company Southpaw Advisor, Senior Siam Commercial Bank PCL Sappe Pub Independent Director, Company Director, Southpa Director, Director, Donm Director, Ltd. Hotel Co., Nanta Director, Nata Director, Rattana Cour Director, Chairman and Managing Director, Rutchayothin Khamtieng P Director, Sar Director,

------

ositions in Other Listed Companies ositions in Other Listed Companies

Period 2012-2013 2015-2016 P Current 2013-Present in Non-Listed Companies Positions Current 2013-Present 2014-Present 2013-2015 Past positions 2012-2013 Past positions - None P Current - None in Non-Listed Companies Positions Current 2004-Present 2008-Present 2010-Present 2010-Present 2010-Present 2008-Present 2008-Present None with director with director and management Family relationship relationship Family

331 - % of 0.00% None total shares

Honors), , National National , nd ersity ersity ersity, U.S. ersity, program Education/Training Education/Training Washington State University, State University, Washington Bachelor of Economics (2 Chulalongkorn Univ MBA, U.S.A Accounting, Degree in Bachelor’s Chulalongkorn Univ Ohio Univ M.B.A., CourseNational Defence Defence College of Thailand (2007) College of Defence International Management Program, MIT Sloan Management

- -

- - - -

48 59 Age (yrs) Vice Vice unthorn Chutima Senior Executive Senior Executive Chief President, Marketing Officer Senior Executive Senior Executive Head of President, Special Business Name/Position

Mr. Thana Thienachariya Mr. - Mr. Sar Mr. -

22. 22.

23. 23. He does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned He does not hold any current position as chairman, or executive director, or authorized director, or all of the or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business aforementioned

305-352 NEW_M5.indd 331 12/3/61 16:37 ANNUAL REPORT 2017

., Ltd. ., elopment entures Co., Ltd. entures Co., Vice President, Head of Vice President, Vice President, Head of Vice President, Head of Vice President, Head of Vice President, Position/Company Position/Company Experience in the past 5 years First Executive Retail Segment and Branch Network V Digital Director, First Executive Wholesale Credit Product Division, Wholesale Banking Group First Executive Wholesale Credit Product and Business Strategy Division & Development First Executive Corporate Strategy Business Dev National ITMX Co.,Ltd. Director, Asset Management Co SCB Director,

------

rent Positions in Other Listed Companies Positions rent Period Past positions 2015-2017 Cur - None in Non-Listed Companies Positions Current 2017-Present

2014-2015 2015-2016 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2016-Present 2017-Present Past positions 2013-2014 None None with director with director and management Family relationship relationship Family

332 - - % of total shares sity sity of ersity am in Commerce am in Commerce , U.S. , ical Engineering, program U.S. U.S. , , Commerce Academy Education/Training Education/Training Bachelor of Business Administration Bachelor of Business Assumption Univer in Accounting, Assumption Univ MBA, Advanced Strategic Management, International Institute for (IMD), Management Development Switzerland (2011) Bachelor of Science in Electrical & Carnegie Computer Engineering, University, Master of Science in Electrical & Carnegie Computer Engineering, University, in Electr D. Ph. UniversityStanford Advanced Management Program, Wharton Univer School, U.S. Pennsylvania, Progr Executive Top and Trade

- -

------

57 44 Age (yrs)

Company

and

ak Sutivong ak Sutivong Senior Executive Vice Senior Executive Chief People President, President, Chief Strategy Chief Strategy President, Secretary Name/Position

Officer Ms. Phanporn Kongyingyong Ms. - Dr. Ar Dr. Vice - Senior Executive

Officer

25. 25. 24. 24. She does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentShe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned He does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 332 13/3/61 17:15 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED Head of ealth Products ealth Products Ltd. Assurance PCL e Assurancee PCL Spring Co.,Ltd. Development Vice President, Division Head, Vice President, Vice President, Vice President, Vice President, Position/Company Position/Company Experience in the past 5 years Director, SCB Plus Co., Director, SCB Life Director, Director, Don Muang International Director, Airport Hotel Co.,Ltd. Amata Director, SCB Lif Director,

First Executive Loan Auto Finance & Personal First Executive Head of Auto Finance & Personal Loan Product Auto Finance & Personal Head of Vice President, Senior Executive W Head of Segment, Wealth First Executive Acquisition Head of Client First Executive and Head of Retail Banking Solutions - - Head of Corporate Segment - - -

ent Positions in Other Listed Companies ent Positions rent Positions in Non-Listed Companies Positions rent Period Past positions 2014-2015 2015-2016 2016-2017

2016-2017 Past positions 2015-2016 Current Positions in Other Listed Companies Positions Current - None Cur 2016-Present 2015-Present Curr 2016-Present - None in Non-Listed Companies Positions Current 2014-Present 2017-Present None None with director with director and management Family relationship relationship Family

333 - - % of total shares ket ket , USA , aduate aduate USA program Education/Training Education/Training Class Honors), nd Thammasat University MBA in Finance and Banking, San Francisco State University Bachelor of ArtBachelor of in Economics, Boston University, SASIN Gr MBA in Finance, ArtsBachelor of in Economics (2 Institute of Business Administration Institute of Business Capital Mar Leadership Program, (2012) Academy

- - - - -

44 54 Age (yrs) Senior Executive Vice Senior Executive Head of Retail President, Segment and Branch Network Vice Senior Executive Head of President, Segment and Wealth Products Wealth Name/Position

Mr. Sarut Ruttanaporn Mr. - Narong Srichukrin Mr. -

26. 26. 27. He does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned He does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 333 13/3/61 17:16 ANNUAL REPORT 2017

Ltd. Position/Company Position/Company e Vice President, e Head of Vice President, e Head of Small Vice President, e e Vice President, e Vice President, e SCB Securities Co., Ltd. SCB Securities Co., Experience in the past 5 years Director, Director, Independent Director, Independent Director, SCB Securities Co.,

First Executiv Mortgage Division Head, Business First Executiv Mortgage and SSME Product First Executiv SME and Head of Mortgage Products - First Executiv Head of Commercial Banking Product First Executiv Head of Commercial Banking Solutions -

ositions in Other Listed Companies

ent Positions in Other Listed Companies ent Positions

Period Past positions 2013-2015 2015-2016 2016-2017 Curr - None in Non-Listed Companies Positions Current 2017-Present Past positions 2015-2016 2016-2017 P Current - None in Non-Listed Companies Positions Current 2013-Present None None with director with director and management Family relationship relationship Family

334 - - % of total shares

USA program sity Education/Training Education/Training Class Honors), Chiang Mai Chiang Mai Class Honors), nd Univer Master of Science Degree in Economics, Development Bachelor of Economics (2 National Institute of Development National Institute of Development Administration Bachelor of ArtsBachelor of in Economics, University of Kansas, MBA in Management, New Hampshire College, USA New Hampshire, Advanced Strategic Management, International Institute for (IMD), Management Development Switzerland (2012)

- -

- - - 49 47 Age (yrs)

Vice Vice Wasin Saiyawan Wasin Senior Executive Senior Executive Head of President, SME Segment Senior Executive Senior Executive Head of President, Multi-Corporate Segment and Corporate Segment

Name/Position Mrs. Pikun Srimahunt Mrs. - Mr. Mr. -

28. 28.

29. 29.

She does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentShe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned He does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 334 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

., Ltd. ., .,Ltd. ities Co., Ltd. ities Co., n Co., Ltd. n Co., Ventures Co., Ltd. Co., Ventures Training Centre Co., Ltd. Centre Co., Training nap (Thailand) Co., Ltd. nap (Thailand) Co., CB Asset Management Co., Ltd. Asset Management Co., CB Position/Company Position/Company e Vice President, Division Head, Division Head, Vice President, e e Vice President, e Vice President, e Vice President, e Vice President, e TRIS Corporation Limited Experience in the past 5 years Executive Vice President, Head of Operations of Head President, Vice Executive Director and Member of the Audit Director and Member of the S Committee, SCB Plus Co Managing Director, SCB Chairman, Mahisor Chairman, SCB Protect Co Director, Digital Director, Director, Director, SCB Secur Director, Super Director,

First Executiv Retail Operations Division First ------First Executiv Head of Corporate Banking First Executiv Head of Corporate Segment 1 First Executiv Head of Corporate Segment First Executiv Head of Multi-Corporate Segment - - -

rent Positions in Other Listed Companies Positions rent 15-2017 Period Past positions 2013-2015 20 in Other Listed Companies Positions Current - None in Non-Listed Companies Positions Current 2009-Present 2009-Present 2014-Present 2016-Present 2017-Present 2014-2015 2015-2016 2016-2017 Past positions 2013 2017-Present Cur 2017-Present - None in Non-Listed Companies Positions Current 2015-Present 2017-Present None None with director with director and management Family relationship relationship Family

335 - - % of total shares ersity ersity t University elopment Program, n Michigan University, n Michigan University, program Education/Training Education/Training Class Honors), nd Chulalongkorn Univ Kasetsar MBA, Bachelor of Science in Statistics, Bachelor of Science in Statistics, Chulalongkorn Univ Easter MBA, USA Michigan, Dev Executive Association Thai Listed Companies (TLCA) (2013) Bachelor in Finance and Accounting Bachelor in Finance and (2

- - -

- 45 52 Age (yrs)

Vice Vice n Senior Executive Senior Executive Head of President, Commercial Banking Solutions Senior Executive Senior Executive Head of President, Head of Operations, Retail Products and Head of Retail Payments

Name/Position

Mrs. Pimolpa Suntichok Mrs. - Mrs. Apiphan Mrs. Charoenanusor -

30. 30.

31. 31. She does not hold any current position as chairman, or executive director, or authorized director, or all of or authorized director, director, or executive currentShe does not hold any position as chairman, groups. positions in other companies exceeding 3 business the aforementioned She does not hold any current position as chairman, or executive director, or authorized director, or authorized director, director, or executive currentShe does not hold any position as chairman, groups. positions in other companies exceeding 3 business or all of the aforementioned

305-352 NEW_M5.indd 335 12/3/61 16:37 ANNUAL REPORT 2017 vings e Ltd. e Position/Company Position/Company e Vice President, e Experience in the past 5 years Chairman, SCB Staff Sa Chairman, Co-Operativ

First Executiv Finance Group Finance Reporting & Control, -

rent Positions in Other Listed Companies Positions rent rent Positions in Other Listed Companies Positions rent Period Cur Past positions 2012-2015 - None in Non-Listed Companies Positions Current 2017-Present Cur - None in Non-Listed Companies Positions Current - None None None with director with director and management Family relationship relationship Family

336 - - % of total shares

ersity University am (CSP) am (CSP) , National National , program Education/Training Education/Training University College London, UK University College London, Bachelor of Business Administration Bachelor of Business in Thammasat Accounting, Accounting, Master of Science in Thammasat University Advanced Management Program, Wharton, USA Banking and Financial Institution Executive Seminar Executive LL.B (Hons), Thammasat Univ LL.B (Hons), LL.M in Commercial and Corporate Law, CourseNational Defense Defense College of Thailand College of Defense SecretaryCompany Progr Director Certification Program the Institute of Directors (DCP),

- - - -

- - -

- 52 55 Age (yrs) e Vice e Vice President, Vice President, Name/Position First Executiv Audit Head of President, Executive Executive Head of Compliance

Mr. Krieng Wongnongtaey Krieng Mr. - Mr. Nopadol Mungonchai Mr. -

1. 1. 2. 2.

Educational background, work experience and record on attending relevant training programs of personnel responsible for Board’s support Board’s for of personnel responsible training programs on attending relevant experience and record work Educational background, He does not hold any current position as chairman, or executive director, or authorized director, or all of or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business the aforementioned He does not hold any current position as chairman, or executive director, or authorized director, or all of or authorized director, director, or executive currentHe does not hold any position as chairman, groups. positions in other companies exceeding 3 business the aforementioned

305-352 NEW_M5.indd 336 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

INFORMATION OF DIRECTORSHIP

Information of directorship of executives in other companies as of December 31, 2017

NO. NAME POSITION COMPANY

1 Mr. Sarunthorn Chutima Director Nantawan Management SEVP, Head of Special Business Co., Ltd. Director Nantawan Co., Ltd. Director Don Muang International Airport Hotel Co., Ltd. Director Primus Co., Ltd Chairman/Managing Director Rutchayothin Assets Management Co., Ltd. Director Kamthieng Development Co., Ltd. Director Rattana Court Co., Ltd. Director Sarapee Kasikam Co., Ltd.

2 Mr. Colin Dinn Director Digital Ventures Co., Ltd. SEVP, Chief Technology Officer Director SCB Abacus Co., Ltd. 337

3 Mr. Thana Thienachariya Director Southpaw Business Co., Ltd. SEVP, Chief Marketing Officer Director Aksorn Education PLC Independent Director Sappe Public Company Limited

4 Mrs. Kittiya Todhanakasem Chairman SCB Abacus Co., Ltd. SEVP, Chief Financial Officer Director The Office of SMEs Promotion (OSMEP) Director SCB Life Assurance PCL

5 Mr. Anucha Laokwansatit Chairman SCB Asset Management Co., Ltd. SEVP, Chief Risk Officer Director SCB Life Assurance PCL Director Digital Ventures Co., Ltd.

6 Ms. Phanporn Kongyingyong Director Digital Ventures Co., Ltd. SEVP, Chief People Officer

7 Mr. Narong Srichukrin Director SCB Plus Co., Ltd. SEVP, Head of Wealth Segment and Head of Director SCB Life Assurance PCL Wealth Products

305-352 NEW_M5.indd 337 12/3/61 16:37 ANNUAL REPORT 2017

NO. NAME POSITION COMPANY

8 Mrs. Apiphan Charoenanusorn Director and Member of the SCB Asset Management Co., Ltd. SEVP, Head of Operations, Head of Retail Audit Committee Products and Managing Director SCB Plus Co., Ltd. Head of Retail Payments Chairman Mahisorn Co., Ltd. Chairman SCB Training Centre Co., Ltd. Director SCB Protect Co., Ltd. Director Digital Ventures Co., Ltd.

9 Mr. Wasin Saiyawan Independent Director SCB Securities Co., Ltd. SEVP, Head of Multi-Corporate Segment and Head of Corporate Segment

10 Mrs. Pimolpa Suntichok Director TRIS Corporation Limited SEVP, Head of Commercial Banking Solutions Director SCB Securities Co., Ltd. Director Supernap (Thailand) Co., Ltd. 338

11 Dr. Arak Sutivong Director SCB Asset Management Co., Ltd. SEVP, Chief Strategy Officer Director National ITMX Co., Ltd.

12 Mrs. Pikun Srimahunt Director SCB Securities Co., Ltd. SEVP, Head of SME Segment

13 Mr. Sarut Ruttanaporn Director Don Muang International Airport SEVP, Head of Retail Segment and Head of Hotel Co., Ltd. Branch Network Director Amata Spring Development Co., Ltd. Director SCB Life Assurance PCL

14 Mr. Krieng Wongnongtaey President S.C.B. Staff Savings Co-operative FEVP, Head of Audit Ltd.

15 Mr. Kiradit Arromdee Director Saimake Co., Ltd. FEVP, Credit Product Division Director SCB Protect Co., Ltd.

16 Mr. Pongsit Chaichutpornsuk Director TOT Public Company Limited FEVP, Head of Financial Crime

17 Mr. Kamalkant Ishwalel Agarwal Chairman of Liquidation Vinasiam Bank Ltd. FEVP, Head of International Banking

305-352 NEW_M5.indd 338 13/3/61 17:16 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

NO. NAME POSITION COMPANY

18 Mr. Suthipat Serirat Independent Director SCB Securities Co., Ltd. FEVP, Head of Investment Banking and Capital Markets

19 Mr. Pipat Assamongkol Partner Yong Seng Pawnshop FEVP, Global Transaction Services Division

20 Ms. Auraratana Jutimitta Director Avalant Co., Ltd FEVP, Retail Segment Strategy and Planning Partner AVA Solutions Work Co., Ltd. Division Director Avalant Global Co., Ltd.

21 Ms. Saranya Vajakul Director SCB Asset Management Co., Ltd. EVP, Head of Financial Planning and Analysis Director SCB Plus Co., Ltd.

22 Mr. Ekkapol Apinun Director SCB Plus Co., Ltd. 339 EVP, Litigation Division Director Mahisorn Co., Ltd. Director SCB Training Centre Co., Ltd. Director Siam Phitiwat Co., Ltd. Director S.C.B. Staff Savings Co-operative Ltd.

23 Mr. Paiboon Tangkanokpairoj Director Siam Phitiwat Co., Ltd. EVP, Prevention & Debt Management Division, Upcountry

24 Mr. Aphisak Kiewkarnkha Director Cambodian Commercial Bank EVP, Head of Group Treasury Ltd.

25 Mr. Somkiat Kuvichitsuwan Director S.C.B. Staffs Savings Co-operative EVP, Branch Network Upcountry Division Ltd. Director SCB Asset Management Co., Ltd.

26 Mr. Trirat Suwanprateeb Partner Thongrungrueang Registered EVP, Head of Technology Operations, Testing Ordinary Partnership & Platforms

27 Mr. Artapong Porndhiti Director Premium Management and EVP, Investment Banking 2 Consultant Co., Ltd.

28 Mrs. Metinee Jongsaliswang Director Kumo Business Service Co., Ltd. EVP, Multi-Corporate Segment 5 Division

305-352 NEW_M5.indd 339 12/3/61 16:37 ANNUAL REPORT 2017

NO. NAME POSITION COMPANY

29 Mr. Sirote Vichayabhai Partner Wrap Inc. EVP, Corporate Segment-Thai 3

30 Mr. Rungsi Vongkitbuncha Director UD Drugstore (2001) Co., Ltd. EVP, Corporate Segment - MNC Division

31 Mr. Somsakul Vinichbutr Partner Impara Intertrade Limited EVP, Client Coverage 1 Partnership

32 Ms. Lalitphat Toranavikrai Director The Crestcent Co., Ltd. EVP, Private Banking Division

33 Mrs. Kanognate Charoensedtasin Partner Arcadedesign Co., Ltd. Head of Project Delivery, Persistent Teams and Partner Arcade Consultant Co., Ltd. Solutioning 340

34 Mrs. Virasana Boonyasai Director Rutchayothin Assets EVP, Prevention & Debt Management Division, Management Co., Ltd. Bangkok

35 Mrs. Siribunchong Uthayophas Director Kler Kaew Korkij Co., Ltd. EVP, Head of Corporate Office Director Krabingern Food Co., Ltd.

36 Ms. Vipasiri Chantanumat Director VP Professional Co., Ltd. EVP, Corporate Segment - Thai 2

Note: The above executives do not hold any current position as chairman, exective director, authorized director, or all of the aforementioned positions in other companies exceeding 3 business groups.

305-352 NEW_M5.indd 340 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

POSITIONS HELD AS THE MANAGEMENT OF THE SUBSIDIARY, ASSOCIATED AND RELATED COMPANY UNDER THE NAME OF BOARD DIRECTORS

Subsidiary Company Related Company (1) (1) (1)

Name of Director Cambodian Commercial Bank Co., Ltd. Cambodian Commercial Bank Co., Ltd. Assets Management Co., Rutchayothin Ltd. SCB Plus Co., Ltd. Centre Co., Training SCB Ltd. Mahisorn Co., Ltd. Asset Management Co., SCB Ltd. SCB Securities Co., Ltd. Co., Ventures Digital Ltd. Abacus Co., SCB Ltd. SCB Protect Co., Assurance PCL SCB Life Ltd. Siam Phitiwat Co., PCL Sor.Or.Kor Siam Commercial Leasing PCL Ltd. National ITMX Co., Ltd. Supernap (Thailand) Co., Ltd. Co., Navuti Ltd. Corp., Thai Obayashi

1 Mr. Anand Panyarachun 2 Dr. Chirayu Isarangkun Na Ayuthaya //

3 Khunying Jada Wattanasiritham X 341 4 Mom Rajawongse Disnadda Diskul // 5 Dr. Vichit Suraphongchai 6 Mrs. Kannikar Chalitaporn 7 Assoc. Prof. Dr. Kulpatra Sirodom 8 Mr. Ekamol Kiriwat 9 Mr. Prasan Chuaphanich 10 Mr. Weerawong Chittmittrapap // 11 Mr. Kriik Vanikkul 12 Mr. Chakkrit Parapuntakul 13 Dr. Ekniti Nitithanprapas 14 Dr. Thaweesak Koanantakool 15 Mr. Kan Trakulhoon 16 Mr. Arthid Nanthawithaya X 17 Mr. Sarunthorn Chutima X // 18 Mrs. Kittiya Todhanakasem X // 19 Mrs. Wallaya Kaewrungruang 20 Mr. Anucha Laokwansatit X // // 21 Dr. Jens Lottner 22 Mr. Colin Dinn // // 23 Mrs. Apiphan Charoenanusorn X XX // // // //

305-352 NEW_M5.indd 341 12/3/61 16:37 ANNUAL REPORT 2017

Subsidiary Company (1) (1) (1)

24 Ms. Phanporn Kongyingyong // 25 Mr. Sarut Ruttanaporn //

342 26 Mr. Narong Srichukrin // // 27 Mr. Thana Thienachariya 28 Mr. Wasin Saiyawan // 29 Dr. Arak Sutivong // // 30 Mrs. Pikun Srimahant // 31 Mrs. Pimolpa Suntichok // // 32 Mr. Patiphan Lerdprasertsiri // //

Remark : x = Chairman // = Director / = Liquidator (1) = Discontinued operations, being in process of dissolution or in process of liquidation

305-352 NEW_M5.indd 342 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

REPORT OF HOLDINGS OF SCB ORDINARY SHARES BY SCB DIRECTORS AND MEMBERS OF SENIOR MANAGEMENT

as at 31 Dec 2017 as at 31 Dec 2016

Name Number Number Total Number Number Total Change: of shares of shares of shares of shares increase / held by a held by held by a held by (decrease) director (a) related director (a) related or a senior person(s) * or a senior person(s) * management management member member

1. Mr. Anand Panyarachun 58,127 402,966 461,093 58,127 402,966 461,093 - Chairman of the Board and Independent Director

2. Dr. Vichit Suraphongchai ------Director and Chairman of the Executive Committee

3. Dr. Chirayu Isarangkun Na Ayuthaya ------Director and Chairman of the Nomination, Compensation and Corporate Governance Committee

4. Khunying Jada Wattanasiritham ------Independent Director, Chairman of the Corporate Social Responsibility Committee, and Member of the Nomination Compensation and Corporate Governance Committee

5. Mr. Prasan Chuaphanich ------Independent Director and Chairman of the 343 Audit Committee

6. M.R. Disnadda Diskul ------Director

7. Dr. Kulpatra Sirodom ------Independent Director, Member of the Audit Committee, and Member of the Corporate Social Responsibility Committee

8. Mr. Ekamol Kiriwat ------Independent Director and Member of the Audit Committee

9. Mr. Krirk Vanikkul - 50,480 50,480 - 50,480 50,480 - Independent Director and Member of the Executive Committee

10. Dr. Thaweesak Koanantakool ------Independent Director and Member of the Executive Committee

11. Mr. Weerawong Chittmittrapap ------Independent Director and Member of the Nomination, Compensation and Corporate Governance Committee

12. Dr. Ekniti Nitithanprapas ------Director and Member of the Nomination, Compensation and Corporate Governance Committee

13. Mr. Kan Trakulhoon ------Independent Director and Member of the Nomination, Compensation and Corporate Governance Committee

305-352 NEW_M5.indd 343 12/3/61 16:37 ANNUAL REPORT 2017

as at 31 Dec 2017 as at 31 Dec 2016

14. Mr. Chakkrit Parapuntakul ------Director and Member of the Corporate Social Responsibility Committee

15. Mrs. Kannikar Chalitaporn 53,000 - 53,000 53,000 - 53,000 - Director, Member of the Executive Committee, and Member of the Corporate Social Responsibility Committee

16. Mr. Arthid Nanthawithaya ------President and Chief Executive Officer, Member of the Executive Committee, and Member of the Corporate Social Responsibility Committee

17. Mr. Sarunthorn Chutima 1,040 4,310 5,350 1,040 4,310 5,350 - Senior Executive Vice President, Head of Special Business

18. Mr. Anucha Laokwansatit ------344 Senior Executive Vice President, Chief Risk Officer

19. Dr. Jens Lottner ------Senior Executive Vice President, Chief Transformation Officer

20. Mr. Colin Richard Dinn ------Senior Executive Vice President, Chief Technology Officer

21. Mrs. Wallaya Kaewrungruang ------Senior Executive Vice President, Chief Legal and Control Officer

22. Mrs. Kittiya Todhanakasem ------Senior Executive Vice President, Chief Financial Officer

23. Ms. Phanporn Kongyingyong ------Senior Executive Vice President, Chief People Officer

24. Mr. Thana Thienachariya ------Senior Executive Vice President, Chief Marketing Officer

25. Mrs. Apiphan Charoenanusorn ------Senior Executive Vice President, Head of Operations, Retail Products and Retail Payments

26. Mr. Narong Srichukrin ------Senior Executive Vice President, Head of Wealth Segment and Wealth Products

27. Dr. Arak Sutivong ------Senior Executive Vice President, Chief Strategy Officer and Company Secretary

305-352 NEW_M5.indd 344 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

as at 31 Dec 2017 as at 31 Dec 2016

28. Mr. Wasin Saiyawan ------Senior Executive Vice President, Head of Multi-Corporate Segment and Corporate Segment

29. Mrs. Pikun Srimahunt ------Senior Executive Vice President, Head of SME Segment

30. Mrs. Pimolpa Suntichok ------Senior Executive Vice President, Head of Commercial Banking Solutions

31. Mr. Sarut Ruttanaporn ------Senior Executive Vice President, Head of Retail Segment and Branch Network

Remark * Related person(s) of directors or senior management members include(s): (1) Spouse or a minor child of a director or senior management member. 345 (2) A juristic person in which aggregate shareholding by a director or senior management member and (1) exceeds 30 percent of the total number of voting rights of such juristic person. (3) A juristic person in which aggregate shareholding by a director or senior management member and (1) and (2) exceeds 30 percent of the total number of voting rights of such juristic person. (4) A juristic person in which a person described under (3) holds its shares and its shareholders in all levels of downward shareholding, beginning from the shareholder in the juristic person under (3), providing that shareholding in each level exceeds 30 percent of the total number of voting rights of the juristic person in the immediate lower level.

305-352 NEW_M5.indd 345 12/3/61 16:37 ANNUAL REPORT 2017

BANKING NETWORK

as at December 31, 2017

Area Office 46 Offices Branch, all nationwide 1,153 Branches

Bangkok and its vicinity 514 Branches Upcountry 639 Branches

Investment Center 4 Branches Business Center 3 Branches Service Center 1 Branch SCB Express 15 Branches

Electronic branch (standalone) 6 Branches In-branch Express 9 Branches

Overseas Branch 5 Branches Affiliated Bank (Cambodian Commercial Bank) 4 Branches 346 Representative Office 2 Branches Business Relation Center 55 Centers

Bangkok and its vicinity 10 Centers Upcountry 45 Centers

International Trade Service Center 47 Centers Foreign Exchange Service Center 102 Centers

Bangkok 53 Centers Tourist locations, Upcountry 49 Centers

ATM 9,560 Machines

Bangkok 2,717 Machines Upcountry 6,843 Machines

305-352 NEW_M5.indd 346 17/3/61 4:21 PM THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

OVERSEA BRANCH

Hong Kong Branch Singapore Branch General Manager: Mr. Theerapan Nunthapolpat General Manager: Ms. Thira Nuntametha Address: Suite 3209, 32/F, Jardine House, Address: 61 Robinson Road #10-03, 1 Connaught Place, Central, Hong Kong Robinson Centre, Telephone: +852-2524-4085 Singapore 068893 Fax: +852-2845-0293 Telephone: +65-6536-4338 Swift: SICOHKHH Fax: +65-6536-4728 E-Mail: [email protected] Swift: SICOSGSG E-Mail: [email protected]

Vientiane Branch Cayman Islands Branch General Manager: Mr. Kanok Sakunkhoo General Manager: Ms. Chau Man Lai Address: 117 Lanexang-Samsenthai Road, Address: P.O. Box 705 George Town, Ban Sisaket, Muang Chanthaburi, Grand Cayman, Cayman Islands Vientiane, Lao People Telephone: +852-2524-4085 Telephone: +856-21-213-501 Fax: +852-2845-0293 Fax: +856-21-213-502 Swift: SICOKYKY Swift: SICOLALA E-Mail: [email protected] 347 E-Mail: [email protected]

Ho Chi Minh Branch General Director: Ms. Saranya Skontanarak Address: Room 605-609, ﬂoor 6, Kumho Asiana Plaza, Saigon, 39 Le Duan Street, District 1, Ho Chi Minh City, Vietnam Telephone: +848-6285-6600 Fax: +848-3822-6550 Swift: SICOVNVX E-Mail: [email protected]

305-352 NEW_M5.indd 347 12/3/61 16:37 ANNUAL REPORT 2017

Affiliated Bank

Cambodian Commercial Bank Head Office - Phnom Penh Cambodian Commercial Bank - Siem Reap Branch Director and Branch Manager: Mr. Suriyah Termlertmanuswong General Manager: Mr. Dara Chiv Address: No. 130 Sivatha Road, Mondol 1, Address: 26 Monivong Road, Sangkat Phsar Sangkat Svay Dangkum, Siem Reap Thmei 2, Khan Daun Penh, Phnom Penh, District, Siem Reap Province, Cambodia Cambodia Telephone: +855-63-964-392 Telephone: +855-23-213-601, +855-23-213-602 Fax: +855-63-380-154 +855-23-426-145 E-Mail: [email protected] Fax: +855-23-426-116 Swift: SICOKHPP E-Mail: [email protected]

Cambodian Commercial Bank - Battambang Branch Cambodian Commercial Bank - Sihanoukville Branch Branch Manager: Mr. Chhin Chou Branch Manager: Mr. Sophy Nuon Address: 116/117 20 Ausapher Village, Svay Por, Address: 242 Ekareach Street, Sangkat 2, Battambang, Cambodia Khan Mittapeab, Sahanoukville Province, Telephone: +855-53-953-313 to 5 Cambodia

348 Fax: +855-53-952-266 Telephone: +855-34-934-777 E-Mail: [email protected] Fax: +855-34-934-999 E-Mail: [email protected]

Representative Office

Beijing Representative Office Yangon Representative Office Chief Representative: Ms. Zhu Ying Chief Representative: Ms. Vitita Theeraporn Address: Room# 1565, 15F China World Tower 3, Address: 17/A Kabar Aye Pagoda Road, No.1 Jianguomenwai Ave., Chaoyang District, Golden Valley Ward II, Bahan Township, Beijing 100004, P.R. China Yangon, Myanmar Telephone: +86-10-5737-2681 Telephone: +95-1-540-229 E-Mail: [email protected] Fax: +95-1-543-667 E-Mail: [email protected]

305-352 NEW_M5.indd 348 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

REFERENCE INFORMATION

THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED Type of business Banking Company registration number 0107536000102 Head office Address: 9 Ratchadapisek Road, Jatujak, Bangkok 10900 Website: www.scb.co.th Tel: 66 2 544-1000 SCB Call Center 66 2 777-7777 SCB Business Call Center 66 2 722-2222

Registrar Ordinary and Preferred Shares The Thailand Securities Depository Company Limited 93 Ratchadapisek Road, Dindaeng Dindaeng, Bangkok 10400 Tel: 66 2009-9000 Fax: 66 2009-9991

Siam Commercial Bank Subordinated Debentures Siam Commercial Bank Public Company Limited No. 2/2012, due in 2024, where the issuer 9 Ratchadapisek Road, Jatujak has the right to redeem prior to maturity Bangkok 10900, Thailand Tel: 66 2544-1000 349 Senior Unsecured Notes Deutsche Bank Trust Company Americas USD 750 million 3.50% due April 2019 60 Wall Street, 16th Floor New York, New York 10005 United States

Senior Unsecured Notes Deutsche Bank Luxembourg S.A. USD 400 million 3.20% due July 2022 2 Boulevard Konrad Adenauer L-1115 Luxembourg Luxembourg

Senior Unsecured Notes Deutsche Bank Luxembourg S.A USD 500 million 2.75% due May 2023 2 Boulevard Konrad Adenauer L-1115 Luxembourg Luxembourg

305-352 NEW_M5.indd 349 12/3/61 16:37 ANNUAL REPORT 2017

Fiscal Agent Senior Unsecured Notes Deutsche Bank AG, Hong Kong Branch USD 750 million 3.5% due April 2019 Level 52, International Commerce Centre 1 Austin Road West, Kowloon Hong Kong

Senior Unsecured Notes Deutsche Bank AG, Hong Kong Branch USD 400 million 3.20% due July 2022 Level 52, International Commerce Centre 1 Austin Road West, Kowloon Hong Kong

Senior Unsecured Notes Deutsche Bank AG, Hong Kong Branch USD 500 million 2.75% due May 2023 Level 52, International Commerce Centre 1 Austin Road West, Kowloon Hong Kong

Auditor Mr. Winid Silamongkol Certified PublicAccountant (Thailand) Registration No. 3378 or Mr. Charoen Phosamritlert Certified PublicAccountant (Thailand) Registration No. 4068 or Ms. Pantip Gulsantithamrong Certified PublicAccountant (Thailand) Registration No. 4208

350 KPMG Phoomchai Audit Ltd. Empire Tower, 50th-51st Floor, 1 South Sathorn Road Yannawa, Sathorn Bangkok 10120, Thailand Tel: 66-2677-2000

305-352 NEW_M5.indd 350 12/3/61 16:37 THE SIAM COMMERCIAL BANK PUBLIC COMPANY LIMITED

Summary of Specified Items Per Form 56-2

Topic Page

1. Policy and business overview 1, 40-41, 49-54

2. Nature of business performance 46-62

3. Risk factors and risk management 66-79

4. General information 310-312, 349-350

5. Shareholders 306-309

6. Dividend policy 308-309

7. Management structure 40-41, 109-126

8. Corporate governance 94-126

9. Corporate social responsibility Refer to Sustainability Report

10. Internal control and risk management 128-131, 141-144

11. Related transactions 132-133 351

12. Financial information 161-162, 169-182

13. Management discussion and analysis (MD&A) 145-159

305-352 NEW_M5.indd 351 12/3/61 16:37 ANNUAL REPORT 2017

352

305-352 NEW_M5.indd 352 12/3/61 16:37 COVER NEW_M5 copy.pdf 1 13/3/61 21:32

Untitled-2 1 17/3/61 6:21 PM